Global banking group Goldman Sachs on Wednesday said India’s real GDP growth is expected to plunge to 1.6 per cent in FY21, as against 3.3 per cent forecast previously and the world is set to face a recession in 2020.
It said over the last two weeks, with the escalation of the COVID-19 crisis, the Goldman Sachs global team is now forecasting the world to be in a recession in 2020, with risks remaining on the downside. “We have downgraded our global GDP forecast to -1.8 per cent in 2020, more than a 5 percentage point (PP) downward revision since early this year. For the US, we have downgraded our growth forecast to -6.2 per cent in 2020 (from -3.7 per cent earlier),” it said.
In India, the spread of the virus, announcements of a nationwide shutdown from March 25, social distancing measures, and fears among consumers and businesses have all escalated sharply over the past two weeks. “High frequency data, as well as anecdotal evidence, although still limited, suggest a significant contraction in economic activity,” Goldman Sachs said.
The Reserve Bank of India had earlier forecast a 5 per cent GDP growth for FY20. However, Goldman Sachs said it expects a strong sequential recovery in the second half of the fiscal year, based on three assumptions.
According to the banking group, the three-week nationwide lockdown — expected to be removed only in a staggered fashion — and social distancing measures will reduce new infections over the next 4-6 weeks.
“Second, while the fiscal easing so far has been limited, our expectation is for further fiscal stimulus by the center and the states. Third, we expect the RBI to continue with its monetary easing policy, along with liquidity infusion measures,” it said.
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