On Monday, S&P Global Ratings cut its estimate for India’s GDP growth for the fiscal starting 1 April to 3.5 per cent from its earlier forecast of 5.2 per cent as it expects the hit to output from the covid-19 outbreak for the Asia-Pacific region to be as large as the financial crisis in Asia during 1997-1998.
‘Amid unusually high uncertainty, we forecast Asia-Pacific growth to dive to 2.2 per cent in 2020 with a U-shaped recovery taking hold only later this year, this would push activity 4 percentage points below trend,’ it said in a report published on Monday.
Moody’s Investors Service last week slashed India’s economic growth projection for 2020 to 2.5 per cent from 5.3 per cent, as the coronavirus pandemic is expected to cause an unprecedented shock to the global economy.
S&P said China is normalizing slowly and is expected to grow at 2.9 per cent in 2020. ‘The regional policy response is aiming at providing a bridge to recovery but risks remain on the downside, especially in emerging markets. Even if global progress is made in containing the virus, the scale of the shock will leave permanent scars on balance sheets and in labor markets, potentially resulting in a shallower rebound. We still expect a limited effect on economic capacity in the medium term, but the total and permanent income loss for Asia-Pacific from COVID-19 is now well above US$0.5 trillion,’ it added.
The rating agency pointed at a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. ‘Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession,’ it added.
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