23/04/2020
BENGALURU (Reuters) – The Indian economy is likely to suffer its worst quarter since the mid-1990s, hit by the ongoing lockdown imposed to stem the spread of coronavirus, according to a Reuters poll, which predicted a mild and gradual recovery.
Over 2.6 million people tmsnrt.rs/3aIRuz7 have been infected by the coronavirus worldwide and more than 180,000 have died. Business and household lockdowns have disrupted supply chains globally, bringing growth to a halt.
The April 17-22 Reuters poll predicted the economy expanded at an annual pace of 3.0% last quarter but will shrink 5.2% in the three months ending in June, far weaker than expectations in a poll published last month for 4.0% and 2.0% growth, respectively.
The predicted contraction would be the first – under any gross domestic product calculation, which has changed a few times – since the mid-1990s, when official reporting for quarterly data began.
“The extended lockdown until early May adds further downside risk to our view of a 5% year-on-year GDP fall in the current quarter, the worst in the last few decades,” said Prakash Sakpal, Asia economist at ING.
“We don’t consider economic stimulus as strong enough to position the economy for a speedy recovery once the pandemic ends,” he said.
(Graphic: Reuters poll graphic on coronavirus impact on the Indian economy IMAGE link: here)
The Indian government announced a spending package of 1.7 trillion rupees in March to cushion the economy from the initial lockdown, which has been extended until May 3.
In an emergency meeting last week, the Reserve Bank of India cut its deposit rate again, after reducing it on March 27 and lowering the main policy rate by 75 basis points. It also announced another round of targeted long-term repo operations to ease liquidity.
But even with those measures, 40% of economists, or 13 of 32 – who provided quarterly figures – predicted an outright recession this year. Only one had expected a recession last month.
In the worst case, a smaller sample of respondents predicted, the economy would contract 9.3% in the current quarter. That compares with 0.5% growth in the previous poll’s worst-case forecast in late March, underscoring how rapidly the outlook has deteriorated.
The latest poll’s consensus view still shows the economy recovering again slowly in the July-September quarter, growing 0.8%, then 4.2% in October-December and 6.0% in the final quarter of the fiscal year, in early 2021.
But that compares with considerably more optimistic near-term forecasts of 3.3%, 5.0% and 5.6%, respectively, in the previous poll.
“A rebound in economic activity following the disruption is expected, but the low starting point of growth implies a gradual recovery,” said Upasana Chachra, chief India economist at Morgan Stanley.
“Indeed, before disruptions related to COVID-19, growth was slowing, with domestic issues of risk aversion in financial sector … (and) those concerns will likely stay after the COVID-19 disruptions have passed unless the policy response is much larger than expected,” she said.
The unemployment rate has tripled to 23.8% since the lockdown started on March 25, according to the Centre for Monitoring Indian Economy, a Mumbai-based research firm.
The Indian economy was now forecast to expand 1.5% in the fiscal year ending on March 31, 2021 – the weakest since 1991 and significantly lower than 3.6% predicted in late March. It probably grew 4.6% in the fiscal year that just ended.
Under a worst-case scenario, the median showed the economy shrinking 1.0% this fiscal year. That would be the first officially reported economic contraction for a 12-month period since GDP was reported to have contracted for calendar year 1979.
“Unless fiscal policy is also loosened aggressively alongside monetary policy, there is a big risk the drastic economic slowdown currently underway morphs into an annual contraction in output and that the recovery is hampered,” said Shilan Shah, senior India economist at Capital Economics.
All 37 economists who answered a separate question unanimously said the RBI would follow up with more easing, including lowering the repo and reverse repo rates and expanding the new long-term loans programme.
The RBI was expected to cut its repo rate by another 40 basis points to 4.00% by the end of this quarter. Already lowered twice over the past month by a cumulative 115 basis points, the reverse repo rate was forecast to be trimmed by another 25 points by end-June to 3.50%.
Source: Reuters
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18/04/2020
BEIJING, April 17 (Xinhua) — China supports the action plan issued by the Group of 20 (G20) to deal with the impact of COVID-19 and will contribute to the G20 efforts to fight the pandemic through its own policy actions, the Ministry of Finance (MOF) said Friday.
G20 finance ministers and central bank governors agreed Wednesday to suspend debt service payments for the world’s poorest countries from May 1 until the end of the year.
China will implement more proactive fiscal policies with higher quality and efficiency, appropriately increase the fiscal deficit ratio, issue special government bonds, increase the scale of special bonds for local governments, and further cut taxes and fees, the MOF said.
In the process, China will strengthen macroeconomic policy coordination with G20 members and jointly support the implementation of the G20 action plan, the MOF said.
China will carry out specific work through bilateral consultations at the request of relevant poor borrowers in accordance with the G20 consensus, the MOF said.
To achieve better results of the action plan, China calls on multilateral creditors and commercial creditors to take appropriate actions as soon as possible to jointly help the poorest countries tide over their difficulties, the MOF said.
China has been providing support to the international community through other bilateral and multilateral channels, including donating 20 million U.S. dollars to the World Health Organization and earmarking 10 million U.S. dollars in its Poverty Reduction and Regional Cooperation Fund under the Asian Development Bank to support outbreak control programs in the region.
Source: Xinhua
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10/04/2020
BEIJING (Reuters) – China’s factory gate prices fell the most in five months in March, with deflation deepening and set to worsen in coming months as the economic damage wrought by the coronavirus outbreak at home and worldwide shuts down many countries.
The world’s second-largest economy is trying to restart its engines after weeks of near paralysis to contain the pandemic that had severely restricted business activity, flow of goods and the daily life of people.
Friday’s data from the National Bureau of Statistics suggested a durable recovery was some way off, with China’s producer price index (PPI) falling 1.5% from a year earlier, the biggest decline since October last year. It compared with a median forecast of a 1.1% fall tipped by a Reuters poll of analysts and a 0.4% drop in February.
Headline consumer inflation also eased somewhat last month, partly led by government control measures, while core prices remained benign, leaving more room for monetary easing, some analysts said.
The overall decline in the factory gate gauge was exacerbated by a slump in global oil and commodities prices, which filtered through to crude oil, steel and non-ferrous metal industries, the statistics bureau said in a statement accompanying the data.
“The issue of having more supply than demand, and persistently low oil prices, will intensify deflationary pressures,” said Yang Yewei, a Beijing-based analyst with Southwest Securities.
“Work resumptions on the production side are faster than the repair in demand. Downstream demand is recovering slowly and still remains weak,” he said.
The oil and gas extraction sector had the biggest year-on-year price fall of 21.7%, among the 40 major industrial sectors surveyed, deteriorating sharply from a 0.4% drop in the previous month.
The stringent travel and transport curbs have now been lifted across much of the country including Wuhan, the epicentre of the outbreak where the virus first emerged in late 2019. So far the virus has killed more than 3,300 and infected over 81,000 people in the country.
Analysts expect a deep first-quarter economic contraction in China and have grown increasingly pessimistic about the country’s prospects for 2020 due to the pandemic’s sweeping global impact.
Many economists and policymakers are forecasting a steep global recession this year as numerous countries are forced into lockdowns to contain the spread of the coronavirus, severely curtailing business activity in a major blow to jobs and incomes.
Worldwide, the virus has killed around 95,000 people and infected more than 1.5 million. Policymakers globally have responded to the crisis by launching an unprecedented package of stimulus measures, injecting trillions of dollars to backstop their economies that have been brought to a virtual standstill.
Beijing has also rolled out a series of fiscal and monetary support steps, and sources have told Reuters that policymakers are readying more stimulus in the coming months to stabilise growth and prevent mass unemployment.
China’s consumer prices rose 4.3% from a year earlier in March, compared with a 4.8% gain tipped by a Reuters poll and a 5.2% increase in February, as logistics and transport conditions improved and government price control measures kicked in.
But food prices still rose over 18% from a year earlier, led by a 116.4% jump in pork prices, the data showed. The virus outbreak has pushed up prices of some food items, such as pork and vegetables.
Core inflation – which excludes food and energy prices – remained benign last month at 1.2%，but it still edged up from 1% in February.
Source: Reuters
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