Mumbai, Apr 3 (PTI) Fitch Ratings on Friday projected that the global economy will fall into a deep recession in 2020 due to the massive disruptions caused by the Covid-19 pandemic, with growth print contracting by 1.9 per cent, pulled down by larger contraction in the US and the Euro zone.
The ratings agency”s Chief Economist Brian Coulton pegged India”s growth at 2 per cent and China”s at under 2 per cent — making them the two large economies which will not slip into recession.
“A deep global recession is our baseline forecast… The speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to our growth forecasts.
“We now expect world economic activity to decline by 1.9 percent in 2020 with the US, the Eurozone and Britain contracting by 3.3 percent, 4.2 percent and 3.9 percent, respectively.
“China”s recovery in 1Q will be sharply curtailed by the global recession and its annual growth will be below 2 percent,” Fitch said, adding the immediate hit to activity and jobs in the first half of this year will be worse.
The spread of the pandemic and the actions necessary to control it mean we now have to incorporate full-scale lockdowns across Europe and the US and many other countries into the baseline forecasts, it said.
“There are many moving parts, but we now judge that lockdowns could reduce GDP across the EU and the US by 7-8 percent, or 28-30 percent annualised, in 2Q. This is an unprecedented peacetime one-quarter fall in GDP and is similar to what we now estimate occurred in China in 1Q.
“Our baseline forecast does not see GDP reverting to its pre-virus levels until late 2021 in the US and Europe,” said Coulton.
Nationwide lockdowns look to be reducing daily activity by about 20 per cent from normal levels. The impact on growth will depend on how long the lockdowns last.
“A two-three-month crisis with a five-week peak stringency national lockdown period can reduce GDP by 20 percent a day will translate to a 7-8 percent decline in quarterly GDP,” he said, adding this is despite the 10 per cent of US GDP fiscal stimulus package in the US and 5 per cent in Germany and Britain.
On crude prices, it said Brent will average at USD 35 a barrel.