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Fitch worsens its forecast for a drop in Spanish GDP in 2020 to 9.6%


The agency Fitch Ratings has worsened its growth forecast for 2020 to Spain and the whole of the Euro zone due to a greater than expected drop in activity both in Spain and in Italy and France.

Fitch now expects eurozone GDP to drop by 8.2% in 2020, compared to a 7.0% contraction initially estimated. "This reflects incoming data pointing to larger than anticipated declines in activity in France, Italy and Spain for the blockades that were stricter than those of other countries, "say their experts.

Now they hope that Spain's GDP falls 9.6%, compared to the fall of the 7.5% estimated at the end of April; a 9.5% in Italy (previous estimate of 8.0%) and a 9.0% in France (previously 7.0%) in 2020.

The agency has cut its forecasts for world GDP in its latest World Economic Outlook (GEO), although it added that "the fall in world economic activity is close to reaching its lowest point and the collapse may be close to bottoming out"

His new forecast is that world GDP to fall 4.6% in 2020 compared to a 3.9% decline forecast in April. "This reflects downward revisions of the eurozone and the UK and, most importantly, of emerging markets (EM) excluding China"explained Brian Coulton, chief economist at Fitch Ratings.

In this sense, GDP of emerging countries, excluding China, will fall 4.5%, well above the 1.9% drop previously anticipated. This major review reflects the deterioration of the health crisis in many of the large emerging markets in the last month, especially in Brazil, India and Russia.

The biggest cut has been for India, since it anticipates a contraction of 5% when in April it was barely 0.8%. For Brazil, the forecast worsens to -6% from -4%; and to Russia to -5% from -3.3%.

On the other hand, the growth forecast for China, USA and Japan It has not changed since the end of April and remains at 0.7%, -5.6% and -5.0%, respectively. Fitch adds that macroeconomic stimuli have increased in the last month and that the liquidity injected by central banks This is an unprecedented response, which he considers positive.

However, he adds that "a return to economic normality is likely to be a slow and bumpy process". The rupture of the labor market (US unemployment is expected to peak at 20% in May) and the social distancing ongoing will weigh heavily on the consumer spending after the crisis, while companies will be very cautious with the capital expenditure, he warns.

Looking ahead to 2021, Fitch anticipates "'technical' rebound in world GDP growth of 5.1%", with an increase in production in the US and the eurozone of around 4%. "But earlier levels of the virus are unlikely to be reached until mid-2022 in the US and significantly later in Europe despite massive political stimulus, "Brian Coulton concluded.

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