RBI Monetary Policy report: Post-COVID-19 estimates suggest global economy could slump into recession in 2020

The global economy is expected to go into recession after taking into account the impact of the COVID-19 pandemic, the Reserve Bank of India (RBI) said in its latest Monetary Policy report.

"Aggregate demand is expected to be impacted adversely by likely recession in the global economy, caused by disruptions in global supply chains, travel and tourism, and lockdowns in many economies," the RBI said in its latest monetary policy report.

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"The oppressive force of the novel coronavirus (COVID-19) on weak or moderating high-frequency indicators of activity, barring agriculture, indicates that the implicit real GDP growth for Q4:2019-20 in the NSO’s data release could be undershot by a fair margin. In fact, the widening incidence of COVID-19 in March 2020 may produce downward pulls to Q4 GDP," RBI said.

The RBI also noted the impact of lockdowns in various countries, including India.

India has been in a nationwide lockdown since March 25, with media reports hinting at a likelihood of extension.

"While efforts are being mounted on a war footing to arrest its spread, COVID-19 would impact economic activity in India directly through domestic lockdown. Second round effects would operate through a severe slowdown in global trade and growth," the RBI said.

The lockdown is expected to significantly lower aggregate demand in both rural and urban areas, the monetary policy report said.