India's and Brazil's first-quarter 2021 real GDP data show a strong rebound in both economies following a contraction last year of 4.4 per cent in Brazil and 7.1 per cent in India, Moody's Investors Service said on Monday.
Brazil's first-quarter GDP expanded 1.2 per cent from the previous quarter and 2.3 per cent from first-quarter 2020. India's first-quarter GDP rose 1.5 per cent quarter on quarter and year on year.
Therefore, in the first quarter of this year, Brazil's GDP reached and India's GDP surpassed their pre-Covid-19 fourth-quarter 2019 levels, said Moody's in its latest credit outlook report.
Brazil's GDP growth beat Moody's forecast, leading it to upgrade GDP growth forecast to 4.9 per cent in 2021 versus 3.3 per cent previously.
India's first-quarter GDP data suggests that the economy was rebounding strongly just before its second Covid-19 wave and renewed restrictions slowed economic activity in March and April.
"We expect India's real GDP to grow about 9.6 per cent in 2021 and 7 per cent in 2022." The economic outlook for both countries is quite uncertain because of the downside risks of potential third waves of coronavirus, said Moody's.
Nevertheless, both countries' recoveries in real GDP since the second-quarter 2020 pandemic shock suggest that the pace of activity will improve markedly if the pandemic is brought under control on a sustained basis with the help of vaccinations.
India's household and government consumption as well as an 11 per cent year-on-year increase in fixed investment drove its first-quarter recovery.
Net exports which rose slower than imports diminished GDP growth. On the supply side, agriculture, manufacturing and construction led the recovery.
High-frequency indicators show that India's overall economic activity continued to rebound until March this year despite a resurgence of Covid-19 cases toward the end of February.
However, targeted lockdown measures in economically important states began taking a toll on economic activity starting in April. With infections now off their peak, states are beginning to ease restrictions.
As in Brazil, India's mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations accelerates. The government's recently announced strategy to vaccinate 940 million people by December will support economic recovery.
In both countries, said Moody's, the pace of economic recovery will likely be uneven. Ultimately, the rebound will depend on increased private consumption which can be delayed by weaker household balance sheets as a result of job, income and wealth losses.