Credit rating agency Moody's has said India's economy will shrink 3.1 per cent this year.

The agency had pegged India's growth at 0.2 per cent in April amid the pandemic. Moody's said it expects India's economy to register 6.9 per cent growth next year.

As the coronavirus pandemic continues to hit major economies, Moody's also downgraded G20 advanced economies projecting a contraction of 6.4 per cent in 2020, but said that they will grow at 4.8 per cent next year.

Moody's had earlier cut India's credit rating to investment grade 'Baa3' due to lack of implementing policies to boost growth.

"April-June quarter of 2020 will go down in history as the worst quarter for the global economy since at least World War II. We continue to expect a gradual recovery beginning in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health," it said.

The agency said that COVID-19 pandemic will push debt levels in the world's richest nations up by almost 20 percentage points on average this year.

"We estimate that on average in this group, government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the great financial crisis," it stated.

"Compared with the GFC, the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus".

Moody's had singled out China as the only country in G20 to grow during the pandemic forecasting a 1 per cent growth with 7.1 in 2021.

However, it cautioned, saying: "Asian countries are particularly vulnerable to changes in geopolitical dynamics. The rise in tensions between China and countries bordering the South China Sea and clashes on the border with India suggest that geopolitical risks are rising for the entire region." 
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Credit rating agency Moody's has said India's economy will shrink 3.1 per cent this year. The agency had pegged India's growth at 0.2 per cent in April amid the pandemic.

Credit rating agency Moody's has said India's economy will shrink 3.1 per cent this year. The agency had pegged India's growth at 0.2 per cent in April amid the pandemic. Moody's said it expects India's economy to register 6.9 per cent growth next year. As the coronavirus pandemic continues to hit major economies, Moody's also downgraded G20 advanced economies projecting a contraction of 6.4 per cent in 2020, but said that they will grow at 4.8 per cent next year. Moody's had earlier cut India's credit rating to investment grade 'Baa3' due to lack of implementing policies to boost growth. "April-June quarter of 2020 will go down in history as the worst quarter for the global economy since at least World War II. We continue to expect a gradual recovery beginning in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health," it said. The agency said that COVID-19 pandemic will push debt levels in the world's richest nations up by almost 20 percentage points on average this year. "We estimate that on average in this group, government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the great financial crisis," it stated. "Compared with the GFC, the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus". Moody's had singled out China as the only country in G20 to grow during the pandemic forecasting a 1 per cent growth with 7.1 in 2021. However, it cautioned, saying: "Asian countries are particularly vulnerable to changes in geopolitical dynamics. The rise in tensions between China and countries bordering the South China Sea and clashes on the border with India suggest that geopolitical risks are rising for the entire region."

'Geopolitical risks': India's economy to contract 3.1% in 2020, says Moody's

The credit rating agency Moody's Investors Service on Thursday predicted a stable outlook for banks across Asia-Pacific over the next 12 months but warned that operating conditions could become increasingly demanding.

"The banks' creditworthiness will stay broadly stable in 2019 because of the still-healthy economic fundamentals and good credit buffers," said Moody's Vice President Eugene Tarzimanov in a statement.

The agency said the capital, provisions and profits of Asia-Pacific banks guarantee them a sufficient margin to absorb losses, while funding and liquidity will remain stable.

He also highlighted his conviction that government support to these banks will remain strong and that their senior creditors will not be required to pay bailouts, with the exception of Hong Kong.

At the same time, Moody's indicated that GDP growth in the region “has peaked and will moderate,” and that “credit expansion will continue to slow,” with the US-China trade conflict posing a risk for banks.

The agency also warned of the high private sector leverage in many of the regional economies, “exposing banks to the risk of asset quality impairment” as interest rates rise.

It also warned about the exposure of banks to real-estate sector risks despite the fall or moderation of prices, and highlighted loans for sector investment purposes as the greatest risk for banks of Australia, New Zealand, South Korea and Malaysia.

"Overall, the banks will have sufficient buffers against growing risks," said Moody's in the statement where it added that digitization will help "banks scale down their branch networks and lower costs."

The credit rating agency Moody's Investors Service on Thursday predicted a stable outlook for banks across Asia-Pacific over the next 12 months but warned that operating conditions could become increasingly demanding.

The credit rating agency Moody's Investors Service on Thursday predicted a stable outlook for banks across Asia-Pacific over the next 12 months but warned that operating conditions could become increasingly demanding. "The banks' creditworthiness will stay broadly stable in 2019 because of the still-healthy economic fundamentals and good credit buffers," said Moody's Vice President Eugene Tarzimanov in a statement. The agency said the capital, provisions and profits of Asia-Pacific banks guarantee them a sufficient margin to absorb losses, while funding and liquidity will remain stable. He also highlighted his conviction that government support to these banks will remain strong and that their senior creditors will not be required to pay bailouts, with the exception of Hong Kong. At the same time, Moody's indicated that GDP growth in the region “has peaked and will moderate,” and that “credit expansion will continue to slow,” with the US-China trade conflict posing a risk for banks. The agency also warned of the high private sector leverage in many of the regional economies, “exposing banks to the risk of asset quality impairment” as interest rates rise. It also warned about the exposure of banks to real-estate sector risks despite the fall or moderation of prices, and highlighted loans for sector investment purposes as the greatest risk for banks of Australia, New Zealand, South Korea and Malaysia. "Overall, the banks will have sufficient buffers against growing risks," said Moody's in the statement where it added that digitization will help "banks scale down their branch networks and lower costs."

Moody's forecasts stable outlook for Asia-Pacific banks in 2019

Moody&#39;s Investors Service on Monday said continued reforms to enhance business environment and moderate inflation will help India achieve robust growth, but cautioned that rising contingent liability risks in the banking sector could affect its credit quality. 
 
Evidence of success in policymakers&#39; efforts to introduce growth-enhancing economic and institutional reforms would provide support for a rating upgrade, Moody&#39;s said in its Annual Credit Analysis as it forecast GDP growth at about 7.5&nbsp;per cent&nbsp;for next two years. 
 
&quot;Sustained fiscal consolidation, stable inflation at moderate levels and progress on reforms aimed at enhancing the business environment would contribute to sustained growth at robust levels. In turn, persistent income and profit growth would raise government revenues and contribute to improved fiscal metrics. However, we expect the benefits to be very gradual,&quot; Moody&#39;s said. 
 
India&#39;s credit profile is supported by strong growth potential and high private savings rate, it said. 
 
&quot;Conversely, signs of slippage in progress towards those goals or indications of rising contingent liability risks related to the banking sector could weigh on India&#39;s credit quality,&quot; Moody&#39;s added. 
 
India&#39;s strengths are balanced against a high government debt burden (67.4 per cent of GDP in 2015), regulatory and infrastructure constraints on its competitiveness,&nbsp;slow&nbsp;pace of policy reform, and the contingent liability risk to the sovereign from public sector banks&#39; high and rising non-performing loans. 
 
&quot;Looking ahead, evidence of success in policymakers&#39; efforts to introduce growth-enhancing and growth-stabilising economic and institutional reforms would provide support for a rating upgrade,&quot; it said. 
 
Moody&#39;s further said that institutional strength is apparent in robust democratic apparatus. Offsetting weaknesses include an uncertain regulatory environment, corruption, a slow-moving judicial system and, in general, inefficiencies in the delivery of government services, it added. 
 
&quot;At the current juncture, political fragmentation leads to slow and ad-hoc progress on reforms. Progress on land and labour reforms, when it has occurred has been limited and gradual,&quot; it said. 
 
Moody&#39;s said the positive outlook on India&#39;s rating reflects our expectation that policies over the next 12 to 18 months will support sustained growth, accompanied by narrower fiscal deficits, low current account deficits, increased savings and investment, and inflation that is within the central bank&#39;s target. 
 
Over the past year, it said external developments favourable to India such as lower global oil prices have combined with policy measures to move the economy towards a more stable macroeconomic development with smaller fiscal deficits, lower inflation and a narrower current account deficit.

Moody&#39;s analyses India&#39;s credit profile in terms of economic, institutional and fiscal strength and susceptibility to event risk.
&quot;We expect corporates&#39; profitability to remain muted which will continue to dampen their ability and willingness to invest in the next few quarters. We forecast real GDP growth at about 7.5&nbsp;per cent&nbsp;in the next two years,&quot; Moody&#39;s said. 
 
Material improvements to India&#39;s public finances will likely be limited in the near term, and deficit reduction will come from either cyclical upswings or tactical fiscal management, rather than a broad-based fiscal consolidation strategy. 
 
Moody&#39;s said India&#39;s susceptibility to event risk is driven by banking sector risk. As banks continue to recognise bad assets, non-performing loans will rise further, particularly for public sector banks (PSBs), albeit at a slower pace than at the end of 2015. 
 
The agency estimates the capital needs of PSBs to be notably larger than the Rs 70,000 crore of equity over the next four years proposed by the government. 
 
&quot;The authorities&#39; focus on bad asset recognition and provisioning in the banking system, as well as the recent passage of a new bankruptcy bill, would be credit positive from a sovereign perspective&nbsp;if it led to improved bank capitalisation levels, renewed loan growth and robust risk processes,&quot; Moody&#39;s said. 
 
The US-based agency said that reforms to improve the business environment will help to realise India&#39;s growth potential, but the benefits of these measures would be very gradual. 
 
The &#39;Make in India&#39; programme aims to increase the share of manufacturing to 25&nbsp;per cent&nbsp;in 2020 from the current 16&nbsp;per cent. This implies growth in manufacturing value added of 12-14&nbsp;per cent&nbsp;per year, compared with only 8.1&nbsp;per cent&nbsp;in FY2016, Moody&#39;s added. 
 
&quot;But inadequate infrastructure, limited flow of workers from the agriculture sector and, to some extent, only moderate levels of investment in innovation will hamper growth in the manufacturing sector and the economy as a whole. These factors are likely to prevent a sharp improvement in India&#39;s competitiveness,&quot; it said. 
 
(PTI)

The study estimates that capital needs of public sector banks will be larger than the proposed $10.45 billion of equity in 4 years

Moody's Investors Service on Monday said continued reforms to enhance business environment and moderate inflation will help India achieve robust growth, but cautioned that rising contingent liability risks in the banking sector could affect its credit quality. Evidence of success in policymakers' efforts to introduce growth-enhancing economic and institutional reforms would provide support for a rating upgrade, Moody's said in its Annual Credit Analysis as it forecast GDP growth at about 7.5 per cent for next two years. "Sustained fiscal consolidation, stable inflation at moderate levels and progress on reforms aimed at enhancing the business environment would contribute to sustained growth at robust levels. In turn, persistent income and profit growth would raise government revenues and contribute to improved fiscal metrics. However, we expect the benefits to be very gradual," Moody's said. India's credit profile is supported by strong growth potential and high private savings rate, it said. "Conversely, signs of slippage in progress towards those goals or indications of rising contingent liability risks related to the banking sector could weigh on India's credit quality," Moody's added. India's strengths are balanced against a high government debt burden (67.4 per cent of GDP in 2015), regulatory and infrastructure constraints on its competitiveness, slow pace of policy reform, and the contingent liability risk to the sovereign from public sector banks' high and rising non-performing loans. "Looking ahead, evidence of success in policymakers' efforts to introduce growth-enhancing and growth-stabilising economic and institutional reforms would provide support for a rating upgrade," it said. Moody's further said that institutional strength is apparent in robust democratic apparatus. Offsetting weaknesses include an uncertain regulatory environment, corruption, a slow-moving judicial system and, in general, inefficiencies in the delivery of government services, it added. "At the current juncture, political fragmentation leads to slow and ad-hoc progress on reforms. Progress on land and labour reforms, when it has occurred has been limited and gradual," it said. Moody's said the positive outlook on India's rating reflects our expectation that policies over the next 12 to 18 months will support sustained growth, accompanied by narrower fiscal deficits, low current account deficits, increased savings and investment, and inflation that is within the central bank's target. Over the past year, it said external developments favourable to India such as lower global oil prices have combined with policy measures to move the economy towards a more stable macroeconomic development with smaller fiscal deficits, lower inflation and a narrower current account deficit. Moody's analyses India's credit profile in terms of economic, institutional and fiscal strength and susceptibility to event risk. "We expect corporates' profitability to remain muted which will continue to dampen their ability and willingness to invest in the next few quarters. We forecast real GDP growth at about 7.5 per cent in the next two years," Moody's said. Material improvements to India's public finances will likely be limited in the near term, and deficit reduction will come from either cyclical upswings or tactical fiscal management, rather than a broad-based fiscal consolidation strategy. Moody's said India's susceptibility to event risk is driven by banking sector risk. As banks continue to recognise bad assets, non-performing loans will rise further, particularly for public sector banks (PSBs), albeit at a slower pace than at the end of 2015. The agency estimates the capital needs of PSBs to be notably larger than the Rs 70,000 crore of equity over the next four years proposed by the government. "The authorities' focus on bad asset recognition and provisioning in the banking system, as well as the recent passage of a new bankruptcy bill, would be credit positive from a sovereign perspective if it led to improved bank capitalisation levels, renewed loan growth and robust risk processes," Moody's said. The US-based agency said that reforms to improve the business environment will help to realise India's growth potential, but the benefits of these measures would be very gradual. The 'Make in India' programme aims to increase the share of manufacturing to 25 per cent in 2020 from the current 16 per cent. This implies growth in manufacturing value added of 12-14 per cent per year, compared with only 8.1 per cent in FY2016, Moody's added. "But inadequate infrastructure, limited flow of workers from the agriculture sector and, to some extent, only moderate levels of investment in innovation will hamper growth in the manufacturing sector and the economy as a whole. These factors are likely to prevent a sharp improvement in India's competitiveness," it said. (PTI)

Moody's: India GDP growth rate will be about 7.5% over next two years