ADB cuts India’s growth forecast to 4pc for FY 2020 amid Covid-19 pandemic

ADB cuts India’s growth forecast to 4pc for FY 2020 amid Covid-19 pandemic

Agency News

New Delhi, Apr 3: The Asian Development Bank on Friday projected that India’s gross domestic product will slow to 4.0 per cent in fiscal year 2020 ending on March 31, 2021 due to a weak global environment and continued efforts to contain the novel coronavirus outbreak in the country.

The GDP will be strengthened to 6.2 per cent in FY 2021. In India, measures to contain the spread of the virus and a weaker global environment this year will offset the benefits from recent tax cuts and financial sector reforms, according to the Asian Development Outlook (ADO) 2020, the ADB's annual flagship economic publication. Growth is expected to rebound to 6.2 per cent in 2021, assuming that the outbreak ends and activity normalises.

Regional economic growth in developing Asia will decline sharply in 2020 due to the effects of the Covid-19 pandemic, before recovering in 2021, the report said. The report forecast regional growth of 2.2 per cent in 2020, a downward revision of 3.3 percentage points relative to the 5.5 per cent ADB had forecast in September 2019. All of developing Asia’s subregions will see growth weaken this year because of weak global demand, and in some economies because of domestic outbreaks and containment policies, the outlook said.

'Subregions that are more economically open like East and Southeast Asia, or tourismdependent like the Pacific, will be hard hit. Economic activity in the Pacific subregion is expected to contract by 0.3per cent in 2020 before recovering to 2.7per cent in 2021.' Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, developing Asia is forecast to grow 2.4 per cent this year, compared to 5.7 per cent in 2019, before rebounding to 6.7 per cent next year. 'The evolution of the global pandemic—and thus the outlook for the global and regional economy —is highly uncertain. Growth could turn out lower, and the recovery slower, than we are currently forecasting. For this reason, strong and coordinated efforts are needed to contain the COVID-19 pandemic and minimize its economic impact, especially on the most vulnerable,' said ADB Chief Economist Yasuyuki Sawada. In the People’s Republic of China (PRC), a sharp contraction in industry, services, retail sales, and investment in the first quarter due to the COVID-19 outbreak will pull growth down to 2.3 per cent this year.

Growth will rebound to an above normal 7.3 per cent in 2021 before reverting back to normal growth. Underpinning much of the weakness across Asia is a deteriorating external environment, with growth stagnating or contracting in the major industrial economies of the United States, Euro area, and Japan. Some commodity and oil exporters, such as those in Central Asia, will be hit by a collapse in commodity prices. Brent oil prices are expected to average USD35 per barrel this year, down from USD 64 in 2019.(UNI)