As if the news from the stock markets was not enough to dampen the spirits of the managers of Indian economy, Standard and Poor’s (S&P), issued a fresh outlook for 2020 saying the growth rate would be only 5.2%. The rating agency’s earlier projection was 5.7%. Well, in the conditions currently prevailing with virtual fear gripping the public and practically every section of the society, even this 5.2% may be acceptable. But that is the state of affairs that you have stopped expecting to hear anything good these days.
S&P feels the Asia Pacific region may slide into recession. Most countries are choosing to lock-down entire cities to save their public from the threat of the dreaded coronavirus or COVID-19.
Other two agencies, Moody’s and OECD (Organisation for Economic Cooperation and Development) had already slashed their forecasts for 2020 to 5.3% and 5.1% respectively.
In S&P’s assessment, there will be increased job losses and there could be a prolonged period of shocks in the economy due to demand and supply constraints.
When people are not allowed to move freely, due to shutting down of public transport, businesses will feel the pinch of demand dropping steeply. When major economies like the US and Europe are on shutdown mode, those companies in the Asia Pacific region engaged in exports to these countries will be severely impacted.
S&P has further stated in its report that the real outcome of the pandemic’s effect on the economies will be known only in the second quarter and they will make a review then before releasing their fresh forecasts.
The projection for China for the year 2020 is even worse, at 2.9%, a steep decline from 4.8% projected earlier.
Fitch Ratings too had almost similar things to say in its forecast. They all believe everything will be based on how quickly things return to normal, which does not seem to be any time soon as things stand.
While the governments may still take measures to buttress the impact on individuals and small businesses, the government’s own finances will be dented and banks will also feel the stress.