Mumbai: Fitch Ratings has made further large cuts to global GDP forecasts in its latest Global Economic Outlook (GEO) in response to coronavirus-related lockdown extensions and incoming data flows.
With China and India both now expected to see sub-1% growth, we expect an outright contraction in EM GDP in 2020, a development unprecedented since at least the 1980 "World GDP is now expected to fall by 3.9% in 2020, a recession of unprecedented depth in the post-war period," said Brian Colton, Chief Economist at Fitch Ratings.
"This is twice as large as the decline anticipated in our early April GEO update and would be twice as severe as the 2009 recession." The decline in GDP equates to a USD2.8 trillion fall in global income levels relative to 2019 and a loss of USD4.5 trillion relative to our previous expectations of 2020 global GDP.
Fitch expects eurozone GDP to decline by 7%, US GDP by 5.6%, and UK GDP by 6.3% in 2020. The biggest downward revisions are in the eurozone, where the measures to halt the spread of the coronavirus have already taken a very heavy toll on activity in 1Q20.
“We have cut Italy's 2020 GDP forecast to -8% following official indications that GDP already fell 5% in 1Q20 and after a recent extension of the lockdown there,” it said. Official estimates also point to France and Spain experiencing near 5% declines in GDP in 1Q20, with the Spanish outlook hit particularly hard by the collapse in tourism.
Even allowing for a slightly less negative outlook for Germany - where the headroom for policy easing is greater and the benefits of a recovery in China will be felt more directly - eurozone GDP is expected to shrink by 7% this year.
No country or region has been spared from the devastating economic impact of the global pandemic. We now anticipate that GDP in both the US and the UK - where lockdowns started a little later than in the eurozone - will decline by more than 10% (not annualised) in 2Q20, compared to forecasts of around 7% earlier.