Moody's Investors See No GDP Growth For FY21

Moody's Investors Service on Friday estimated its GDP forecast for FY21 at 0% and FY22 at 6.6%. Also, at the same time it said that the country's sovereign rating upgrade from 'Baa2 negative' is unlikely to be made in the near term due to the coronavirus-led recession, high debt levels as well as weak policy measures.

"The negative outlook reflects increasing risks that economic growth will remain significantly lower than in the past. This is in light of the deep shock triggered by the coronavirus outbreak, and partly reflects lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses, leading to a gradual rise in the debt burden from already high levels," Moody's said in a report.

Earlier in November last year, the firm lowered the country's outlook to negative from the earlier stable, while maintaining 'Baa2' rating.

Also for the FY20, the agency estimates fiscal deficit to be at 5.5% of GDP.

"We expect the economic shock from the coronavirus outbreak and the fiscal policy response to result in significant slippage from the central government's budgeted deficit target of 3.5 percent of GDP for fiscal 2020. Further increases in fiscal expenditure to support the economy, combined with weaker overall revenue and disinvestment receipts, are likely to drive the central government deficit to around 5.5 percent of GDP in fiscal 2020," it added.

The agency is of the view that the coronavirus pandemic will only add to the woes of the economy which was already confronting material economic slowdown.

To ease the consequences, the institution added that government policies need to support the country so as to reduce both the scale as well as the duration of the downturn.

Nonetheless problem is likely to be a deep-rooted one given the weak employment outlook, the recent credit crisis in the NBFC space and the financial distress among rural families.

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