Global GDP to fall by 4.4% in 2020 - Fitch | Daily News


 

Global GDP to fall by 4.4% in 2020 - Fitch

Brian Coulton, Chief Economist, Fitch
Brian Coulton, Chief Economist, Fitch

Fitch Ratings in its latest Global Economic Outlook (GEO) released Monday expects global GDP to fall by 4.4% in 2020, a modest upward revision from the 4.6% decline expected in the June GEO.

The recovery in economic activity after the unprecedented severe coronavirus-related recession in March and April has been swifter than anticipated, but we expect the pace of expansion to moderate soon.

“China has already regained its pre-virus level of GDP and retail sales in the US, France and the UK now exceed February levels, but we doubt this will become the much-lauded ‘V’-shaped recovery. Unemployment shocks lie ahead in Europe, firms are cutting capex, and social distancing continues to directly constrain private-sector spending”, said Brian Coulton, Chief Economist, Fitch Ratings.

“Our 2020 China growth forecast is +2.7% (this was revised in late-July at the time of our most recent China sovereign rating review) compared to +1.2% in the June GEO. These revisions have been partly offset by cuts to our 2020 GDP forecasts for the eurozone to -9.0% (-8.0%), the UK to -11.5% (-9.0%) and for emerging markets (EM) excluding China to -5.7% (-4.7%). The latter primarily reflects a huge change in our India forecast for the fiscal year-ending March 2021 (FY21) to -10.5% from -5.0%.

A host of indicators across the majority of GEO economies point to a faster sequential increase in GDP in 3Q20 to date than we were previously anticipating.

“We do not expect the pace of expansion in recent months to continue, as the boost from reopening fades, labour market dislocations constrain consumer spending, and firms retrench on capex. And with the virus outbreak not yet contained, social distancing behaviour and ongoing restrictions will drag on activity,” added Coulton.

The transport and leisure sector - which typically accounts for 8%-10% of GDP in the US and Europe - remains deeply depressed and has not undergone the post-lockdown recovery seen in manufacturing, construction or retail trade.

Emerging markets are in many ways facing tougher economic challenges from the pandemic, given more-limited social safety nets and healthcare capacity and less scope for aggressive macro policy easing.

The GEO forecasts assume that a reversion to highly stringent, nationwide lockdown approaches to virus containment will be avoided, but this is a key downside risk. Such a scenario could prompt renewed falls in GDP although likely on a more limited scale than that seen in 2Q20.

 


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