Fitch joins the bandwagon, sees India’s GDP contract 5% in FY211 min read . Updated: 27 May 2020, 12:29 AM IST
- Apart from India, the rating agency revised downward its growth estimates for Eurozone and the UK, leading to a deeper global recession forecast in 2020
- The rating agency said the collapse in global economic activity may be close to bottoming out
Fitch Ratings on Tuesday projected India’s GDP to contract 5% in FY21--in sync with forecasts by Crisil and Goldman Sachs-- blaming longer than expected lockdown in the country that has crippled normal economic activity.
“The biggest forecast cut was to India where we now anticipate a 5% decline in the current financial year (ending March 2021) in contrast to an earlier forecast of growth of 0.8%. India has had a very stringent lockdown policy that has lasted a lot longer than initially expected and incoming economic activity data have been spectacularly weak," the rating agency said in the latest update to its Global Economic Outlook (GEO).
Apart from India, the rating agency revised downward its growth estimates for Eurozone and the UK, leading to a deeper global recession forecast in 2020 at 4.6% against 3.9% contraction estimated in late-April.
Fitch now expects Eurozone GDP to fall by 8.2% in 2020 compared to a contraction of 7.0% in its previous GEO. “This reflects incoming data that point to larger-than-anticipated falls in activity in France, Italy and Spain amid lockdowns that were more stringent than those in some other countries," it said. Forecasts for 2020 GDP growth for China, the US and Japan are unchanged since late April at 0.7%, -5.6% and -5.0%, respectively.
The rating agency said the collapse in global economic activity may be close to bottoming out. “A number of early monthly economic indicators for May have improved slightly on their April values and daily mobility data show consumer visits to retail and recreation venues have increased in the eurozone and the US since lockdowns started to be eased in late April/early May," it added.
"We foresee a 'technical' pick-up in global GDP growth to 5.1% in 2021 - with US and eurozone output rising by around 4%, but pre-virus levels of GDP are unlikely to be reached until mid-2022 in the US and significantly later in Europe. This is despite massive policy stimulus," said Brian Coulton, chief economist at Fitch Ratings.
However, the rating agency warned that an aggressive resurgence of the coronavirus that necessitates greatly extended or renewed nationwide lockdowns would lead to an even worse outcome. “Our downside scenario sees GDP falling by 12% in the US and Europe in 2020 and global GDP down by more than 9%," it cautioned.