Days after forecasting India’s growth to remain somewhere around 5.3% for the calendar year 2020, Moody’s, the other day, cut India’s growth to a mere 2.5% for the year 2020. Moody’s cut is the result of the county-wide lockdown, which will push various sectors into a ditch while others will incur heavy losses resulting in job losses.
Moody’s, however, also said that India’s growth will rebound in 2021 and would stand somewhere around 5.8%.
The GDP in the country, despite the RBI’s plans to hold the economy at its place, will remain somewhere at 4.5% for the April-June 2020 quarter.
However, there would be a sharp rise in job losses across countries in the months to come said Moody’s adding that “the speed of the recovery will depend on to what extent job losses and loss of revenue to businesses is permanent or temporary.”
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Moody’s added that growth in the advanced economies across the world will plunge by 2% in 2020 against 1.7% growth in 2019 and emerging economies will slow to 1.9% from 4.2%.
China’s economy will also take a beating as its growth forecast has been cut from 6.1% in the previous year to 3.3% in 2020.
“A general lack of social safety nets, weak ability to provide adequate support to businesses and households, and inherent weaknesses in many major emerging market countries will amplify the effects of the coronavirus-induced shock,” Moody’s said.
Recession
The cut in the economic growth follows the International Monetary Fund (IMF) announcement of the global economy entering a recession, which is worse than the 2009 global recession.
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IMF chief Kristalina Georgieva said coronavirus pandemic has driven the global economy into a downturn. And the developing nations would require massive funding to bounce back.
However, just like Moody’s, IMF chief also said that that world would recover from the recession if it is successfully able to contain the virus and can prevent liquidity problems from becoming a solvency issue.
A recession has dire effects on economies as it leads to a change in the spending habit of both, the people and the investors. With people spending less, demand in the market plummets leading to sector-wise losses that deal in products and services and thus resulting in job loss.
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Moody’s expects real GDP in the global economy to contract by 0.5% in 2020, followed by a pickup to 3.2% in 2021.
