China and India have driven much of the global growth since the global financial meltdown of 2008.
But following the novel coronavirus pandemic, economic activity in both countries has plunged which has raised the risk of prolongation of the expected global recession due to the pandemic.
On Friday, China did not set for itself any economic growth target for the current year which is a first in almost three decades and is signals the extent of uncertainty cased in the second largest economy of the world by the coronavirus pandemic.
China has set a growth target in the range of 6 per cent and 6.5 per cent last year and its GDP grew at 6.1 per cent which was the slowest in almost 30 years.
On the other hand, India expects that its economy will not grow at all in the current fiscal year according to an announcement by Shaktikanta Das, the governor of the Reserve Bank of India, the country’s central bank, on Friday. India’s fiscal year will end in March 31, 2021. The Indian economy has not contracted on a yearly basis since 1979.
These announcements cast further doubt on the ability of the global economy to recover from its deepest downturn since the Great Depression.
Economic forecast were also slashed by the Bank of America m which told its clients on Friday that it now expects a shrinking of 4.2 per cent for the global economy for this year. The bank had previously put the figure at 2.7 per cent contraction six weeks ago.
The latest prediction by the IMF on global economic growth as was forecast by it in April was a contraction of 3 per cent for 2020.
Investors are getting even more worried because of the deteriorating relationship between the United States and China.
The global economy is also concerned about the potential developments in Hong Kong. On Friday, following news that the China was preparing to pass a controversial national security law which would deal the biggest blow to the autonomy of the city since it was handed over to China in 1997 by Britain, caused a fall in global stocks.
The move was condemned by the State Department of the United States which also warned that “any effort to impose national security legislation that does not reflect the will of the people of Hong Kong” would be met with an international response.
US criticism of China over the handling of the coronavirus pandemic has already raised tensions between the two countries.
(Adapted from CNN.com)