Q1 GDP data in India, Brazil suggest strong post-COVID recoil: Moody's

16 Jun '21
3 min read
Pic: Shutterstock
Pic: Shutterstock

The real gross domestic product (GDP) data of India and Brazil for the first quarter (Q1) of 2021 show a strong rebound in both economies following a contraction last year of 7.1 per cent in India and 4.4 per cent in Brazil, according to Moody's Investors Service, which recently said India's Q1 GDP rose by 1.5 per cent quarter on quarter (QoQ) and year on year (YoY).

Brazil's Q1 2021 GDP expanded by 1.2 per cent over the previous quarter, and 2.3 per cent from that of Q1 2020.

Therefore, in Q1 this year, Brazil's GDP reached and India's GDP surpassed their pre-COVID-19 Q4 2019 levels, said Moody's in its latest credit outlook report.

Brazil's GDP growth beat Moody's forecast, leading it to upgrade GDP growth forecast to 4.9 per cent in 2021 versus 3.3 per cent previously.

India's first-quarter GDP data suggests that the economy was rebounding strongly just before its second wave of the pandemic and renewed restrictions slowed economic activity in March and April.

"We expect India's real GDP to grow about 9.6 per cent in 2021 and 7 per cent in 2022," Moody’s was quoted as saying by a news agency.

The economic outlook for both countries is quite uncertain because of the downside risks of potential third waves of coronavirus, said Moody's.

Nevertheless, both countries' recoveries in real GDP since the second-quarter 2020 pandemic shock suggest that the pace of activity will improve markedly if the pandemic is brought under control on a sustained basis with the help of vaccinations.

India's household and government consumption as well as an 11 per cent YoY increase in fixed investment drove its first-quarter recovery.

Net exports which rose slower than imports diminished GDP growth. On the supply side, agriculture, manufacturing and construction led the recovery.

High-frequency indicators show that India's overall economic activity continued to rebound until March this year despite a resurgence of COVID-19 cases toward the end of February.

However, targeted lockdown measures in economically important states began taking a toll on economic activity starting in April. With infections now off their peak, states are beginning to ease restrictions.

As in Brazil, India's mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations accelerates. The government's recently announced strategy to vaccinate 940 million people by December will support economic recovery.

In both countries, said Moody's, the pace of economic recovery will likely be uneven. Ultimately, the rebound will depend on increased private consumption which can be delayed by weaker household balance sheets as a result of job, income and wealth losses.

Fibre2Fashion News Desk (DS)

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