New Delhi: With the Coronavirus outbreak bringing unprecedented shocks to the global economy, Moody’s Investors Service on Friday slashed India’s growth forecast for 2020 to 2.5 per cent from 5.3 per cent earlier.

“The governments of India (Baa2 negative) and South Africa (Baa3 negative) have announced 21-day lockdowns. We expect these measures to dampen economic growth in both countries this year. For India, we are now projecting growth rates of 2.5 per cent in 2020 followed by 5.8 per cent next year,” mentions the credit rating agency in its Global Macro Outlook 2020–21.

It added that in India, credit flow to the economy already remains quite hampered because of severe liquidity constraints in the bank and non-bank financial sectors.

Moody’s in its report stated that the G-20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021.

“We have revised our growth forecasts downward for 2020 as the rising economic costs of the coronavirus shock and the policy responses to combat the downturn are becoming clearer. We now expect G-20 real GDP to contract by 0.5 per cent in 2020, followed by a pickup to 3.2 per cent growth in 2021. In November last year, before the emergence of the Coronavirus, we were expecting G-20 economies to grow by 2.6 per cent in 2020,” states the report.

It had forecast China real GDP growth of 3.3 per cent in 2020, followed by six per cent growth in 2021. Slow improvement in consumer demand will temper the pace of China's recovery.

“In other emerging market countries, a sharp reduction in GDP in the second quarter is also inevitable especially where strict containment measures have been imposed. But the recovery in emerging markets will likely be relatively more muted than in advanced economies. A general lack of social safety nets, a weaker ability to provide adequate support to businesses and households and inherent weaknesses in many of the major emerging market countries will amplify the impact of the shock,” Moody’s clearly states.