IMF Chief Economist: "India's 2Q Growth Rate Worst... China 1st, Korea 2nd"

Guitar Gopinas "Q3 Will Rebound, but Annual GDP Contraction Inevitable"

[Asia Economy Reporter Kim Eunbyeol] It has been confirmed that the Indian economy suffered a severe shock in the second quarter due to the spread of the novel coronavirus infection (COVID-19). Among the Group of Twenty (G20) countries, India experienced the largest decline in growth rate in the second quarter. China is estimated to be the only G20 country to have positive growth, while South Korea showed a relatively smaller decline in growth rate, performing relatively well until the second quarter.

On the 3rd (local time), Gita Gopinath, Chief Economist of the International Monetary Fund (IMF), shared a graph on her Twitter account comparing the decline in second-quarter growth rates of G20 countries using the same criteria. Chief Economist Gopinath said, "The quarter-on-quarter growth rates of G20 countries in the second quarter were historically low," adding, "There will be a rebound in the third quarter, but an annual contraction of Gross Domestic Product (GDP) is inevitable this year."

According to Chief Economist Gopinath’s comparison of the second-quarter GDP of each country based solely on quarter-on-quarter growth rates without annualizing, China’s second-quarter GDP increased by 12.3% compared to the first quarter. It was the only positive growth among G20 countries. South Korea’s second-quarter GDP growth rate was -3.2% quarter-on-quarter, following China. After South Korea came Indonesia (-6.9%), Australia (-7.0%), Japan (-7.8%), Russia (-8.9%), and the United States (-9.1%).

Other: Gopinath, Chief Economist at the International Monetary Fund (IMF).
[Image source=Yonhap News]

The country with the worst quarter-on-quarter growth rate was India, recording a -25.6% growth rate. India’s second-quarter growth rate was -23.9% year-on-year, the lowest figure in 24 years since India began quarterly economic growth rate statistics in 1996. India’s economic growth rate, which exceeded 8% in 2016, began a significant downward trend after 2018. It dropped to the 5% range starting from the fourth quarter of 2018 (5.6%), and with the outbreak of COVID-19 this year, it recorded the worst economic growth rate.

The sharp decline in India’s growth rate compared to the first quarter was due to the nationwide lockdown. India implemented a nationwide lockdown in March to curb the spread of COVID-19, effectively halting economic activities. The lockdown restricted residents’ movement and outings, and all commercial and industrial facilities were closed. This led to a surge in unemployment and a freezing of consumer sentiment. In April, the monthly domestic sales of India’s automobile market, ranked 4th or 5th globally, dropped to zero for the first time ever. The Reserve Bank of India (RBI) also cut interest rates by 1.15 percentage points since March to stimulate the economy, but it has yet to get back on track. The current benchmark interest rate is 4%.

Besides India, the United Kingdom (-20.4%), Spain (-18.5%), and Mexico (-17.1%) also showed sharp declines in growth rates compared to the first quarter, indicating economic downturns.

South Korea’s growth rate performed relatively well compared to other countries overseas until the second quarter. This was due to less stringent lockdown measures and successful quarantine efforts. However, the resurgence of COVID-19 domestically since August, the elevation of social distancing levels, and the slow recovery of exports, which are the backbone of the Korean economy, continue to hamper growth.

According to the International Finance Center, the average economic growth rate forecast for South Korea this year by nine foreign investment banks (Barclays, Bank of America Merrill Lynch, Citi, Credit Suisse, Goldman Sachs, JP Morgan, HSBC, Nomura, UBS) as of the end of August is about -0.8%. This is a 0.1 percentage point downward revision from -0.9% at the end of July. This reflects the impact of consumption contraction due to the second wave of COVID-19 starting in mid-August.

The Bank of Korea’s growth forecast for South Korea this year, announced on the 27th of last month, is -1.3%. This is a significant 1.1 percentage point downward revision from three months ago. The Bank of Korea warned that if the spread of COVID-19 continues until the end of the year, the growth rate could fall to -2.2%.

This content was produced with the assistance of AI translation services.