‘Global economy to contract 4.4%, China to grow at 2.7%’

Fitch sees ‘positive global spillovers’ from China’s recovery

An employee wearing a face mask to protect against the coronavirus waits for customers at a store in a shopping mall in Beijing, Friday, Aug. 14, 2020. China's factory output rose just under 5% last month from a year earlier while retail sales fell slightly, suggesting the country's recovery from the coronavirus pandemic remains muted. (AP Photo/Mark Schiefelbein)

Fitch Ratings on Tuesday projected global GDP to contract 4.4% in the current year, but revised upwards China’s growth estimate to 2.7% for 2020.

In its September update to the Global Economic Outlook (GEO), Fitch Ratings cut its 2020 GDP forecast for emerging markets, excluding China, to (-)5.7%, from (-)4.7% estimated in June, mainly on account of a huge downward revision to India GDP forecast for the financial year ending March 2021.

Fitch has slashed India’s growth projection to (-)10.5% from (-)5% estimated earlier after official data released last week showed the April-June 2020 quarter GDP contracted by 23.9%.

‘Limited fiscal support’

“India imposed one of the most stringent lockdowns worldwide in 2Q20 (April-June) and domestic demand fell massively. Limited fiscal support, fragilities in the financial system, and a continued rise in virus cases hamper a rapid normalisation in activity,” Fitch said.

It projected the U.S. GDP to contract 4.6% in 2020, less than the 5.6% decline it had forecast in June.

Fitch revised China’s GDP growth forecast to 2.7%, from 1.2% in June, following the stronger-than-expected April-June outturn and continuing recoveries in investment, housing and exports.

“It is important not to underestimate the positive global spillovers that will flow from China’s recovery,” the ratings agency said.