MOODY’S CUTS INDIA'S GROWTH FORECAST TO 5.3% FOR 2020

NEW DELHI: In less than a month, ratings agency Moody’s Investors Service revised its baseline growth projections for India from 5.4% to 5.3% in 2020, saying an extensive and prolonged slump as a result of the Covid-19 outbreak will reduce growth in Asia’s third-largest economy to 5% during the calendar year.

On February 17, Moody’s had reduced India’s growth projection from 6.6% to 5.4% for 2020.

The latest revision, which is part of its Global Macro Outlook, said the global spread of the virus is resulting in simultaneous supply and demand shocks. “We expect these shocks to materially slow economic activity, particularly in the first half of this year. We have therefore revised our 2020 baseline growth forecasts for all G-20 economies. We expect these countries, as a group, to grow by 2.1% in 2020, 0.3 percentage point lower than our previous forecast,” it added.

Moody’s also lowered its 2020 forecast for China to 4.8% from 5.2%. For the US, it now expects real gross domestic product (GDP) to grow by 1.5% in 2020, down from the previous estimate of 1.7%.

Last week, the Organisation for Economic Co-operation and Development (OECD) had slashed India’s growth forecast for FY21 by 110 basis points (bps) to 5.1%, saying the adverse impact of Covid-19 on confidence, financial markets, travel and supply chains could shave 50bps off global growth this year. The virus outbreak could cost the Indian economy between $387 million and $29.9 billion in personal consumption losses, the Asia Development Bank said last Friday.

The spread of Covid-19 over the past few weeks has resulted in significant economic fallout, which is severely hampering not only trade and supply chains, but depressing domestic consumption demand in affected countries and around the world, Moody’s said.