Fitch Ratings has made further large cuts to global GDP forecasts in its latest Global Economic Outlook (GEO) in response to coronavirus-related lockdown extensions and incoming data flows, saying the Indian economy is expected to grow at below one per cent this year.
"With China and India both now expected to see sub-1 per cent growth, we expect an outright contraction in emerging market GDP in 2020, a development unprecedented since at least the 1980s," it said.
Fitch expects supply responses and a relaxation of lockdowns to help oil prices to recover in 2H 20 from current lows, which are being exacerbated by storage capacity issues in the United States and elsewhere.
"World GDP is now expected to fall by 3.9 per cent in 2020, a recession of unprecedented depth in the post-war period," said Brian Coulton, Chief Economist at Fitch Ratings.
"This is twice as large as the decline anticipated in our early April GEO update and will be twice as severe as the 2009 recession."
The decline in GDP equates to a $2.8 trillion fall in global income levels relative to 2019 and a loss of $4.5 trillion relative to our pre-virus expectations of 2020 global GDP. Fitch expects eurozone GDP to decline by 7 per cent, US GDP by 5.6 per cent and UK GDP by 6.3 per cent in 2020.
The biggest downward revisions are in the Eurozone, where the measures to halt the spread of the coronavirus have already taken a very heavy toll on activity in 1Q 20.
A notable feature of this update is sharp further downward revisions to GDP forecasts for emerging markets. Falling commodity prices, capital outflows and more-limited policy flexibility are exacerbating the impact of domestic virus-containment measures.
Mexico, Brazil, Russia, South Africa and Turkey have all seen big GDP forecast adjustments.
Coulton said macro policy responses have been unprecedented in scale and scope and will serve to cushion the near-term shock.
But with job losses occurring on an extreme scale and intense pressures on small and medium-sized businesses, the path back to normality after the health crisis subsidies is likely to be slow.
"Our forecasts now show that US and eurozone GDP remaining below pre-virus (4Q 19) levels through the whole of 2021," added Coulton.