NEW DELHI: The International Monetary Fund (IMF) on Wednesday forecast India’s economy to contract 4.5% in 2020-21, a drastic reduction from its April estimate of 1.9% expansion, as the coronavirus pandemic induced lockdown takes a heavy toll on Asia’s third-largest economy.
“India’s economy is projected to contract by 4.5% following a longer period of lockdown and slower recovery than anticipated in April,” the IMF said in its update to the Global Economic Outlook. Several economists, brokerages and multilateral agencies have pointed to a deep contraction for India, triggered by the strict lockdown announced to stem the spread of the deadly coronavirus.
It said global growth is projected at –4.9% in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. “The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021, global growth is projected at 5.4%,” the IMF said.
China is the only major economy which is expected to post growth in 2020 with the IMF estimating it to expand by 1%, a shade lower than the 1.2% growth estimated in April. It is expected to rebound and grow by 8.2% in 2021.
“The Covid-19 pandemic pushed economies into a Great Lockdown, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression. Over 75% of countries are now reopening at the same time as the pandemic is intensifying in many emerging markets and developing economies. Several countries have started to recover. However, in the absence of a medical solution, the strength of the recovery is highly uncertain and the impact on sectors and countries uneven,” said Gita Gopinath, chief economist at the IMF.
“Compared to our April World Economic Outlook forecast, we are now projecting a deeper recession in 2020 and a slower recovery in 2021,” Gopinath said, while releasing the update.
The IMF said that as with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential); and a hit to productivity as surviving businesses ramp up necessary safety practices, it said.
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