S&P predicts 4.7% slump in emerging market growth, warns of permanent scars

Rating agency S&P Global cut its emerging market growth forecasts on Monday, predicting a 4.7 per cent slump on average this year due to the coronavirus and warned that all countries would be left with permanent scars too.

The firm said the downward GDP revisions mostly reflected the overall worsening pandemic for many emerging markets and a larger hit to foreign trade compared to its last set of expectations in April that predicted a 1.8 per cent contraction.

"We project the average EM GDP (excluding China) to decline by 4.7 per cent this year and to grow 5.9 per cent in 2021. Risks remain mostly on the downside and tied to pandemic developments," S&P said.

It added that there would permanent output losses from the pandemic for all emerging markets, with the gap relative to pre-COVID GDP path as large as 11 per cent in India, 6 per cent-7 per cent in most of Latin America and South Africa, 3 per cent-4 per cent in most of Emerging Europe, and 2 per cent in Malaysia and Indonesia.