Moody’s Lowers India GDP Growth Forecast For 2020 On Coronavirus Concerns
Dampening consumption demand due to a spreading virus exacerbates supply chain disruptions and cross-border trade, Moody’s says.
Moody’s Investors Service has lowered its India GDP growth forecast to 5.3 percent in 2020 due to coronavirus’ impact on the economy.
It expects India’s gross domestic product to grow at 5.8 percent in 2021.
The credit ratings agency had in February this year pegged India’s GDP growth rate at 5.4 percent—also a downgrade from an earlier forecast of 6.6 percent. That compares with the 5.3 percent estimate for 2019 and 7.4 percent achieved in 2018.
Stating that a spreading coronavirus has a significant economic fallout, Moody’s said dampening consumption demand in affected countries exacerbates disruptions to supply chains and cross-border trade of goods and services. "The longer the disruptions last, the greater the risk of global recession becomes," it said.
A number of governments and central banks have announced countervailing steps, including fiscal stimulus packages, rate cuts and regulatory forbearance.
“But the effectiveness of policy easing will be blunted by measures to contain the outbreak, and policy space is constrained for some sovereigns," Moody’s said.
Tighter funding conditions and exchange rate depreciation could stress sovereigns with high foreign currency exposure, heavy reliance on external market funding or low forex reserve coverage, it said.
Also Read: Coronavirus: The Economic Impact Of COVID-19 On India
Moody's said the oil price shock adds to growth and fiscal pressures for exposed sovereigns. "A period of lower oil prices will further weigh on the economic and fiscal fundamentals of oil exporters, while mitigating the trade shock for importers."