GBP/INR recovers slightly on Wednesday, but it’s still trading close to the lowest level since mid-October last year. Currently, one British pound buys 89.737 Indian rupees, up 0.59% as of 6:35 AM UTC.
S&P Lowers India’s GDP Forecast
Both the UK and Indian economy will continue to be affected by the coronavirus outbreak, but rupee weakened after rating agency S&P Global Ratings downgraded India’s GDP forecast to 5.2% for the current fiscal year, citing an upcoming recession of global economy amid COVID-19 pandemic. Previously, the agency anticipated a growth rate of 5.7% for the year.
S&P also referred to the Asia-Pacific region as a whole:
“Asia-Pacific economic growth in 2020 will be more than halve to less than 3 per cent as the “global economy enters a recession… We lower our forecasts for China, India, and Japan for 2020 to 2.9 per cent, 5.2 per cent and -1.2 per cent (from 4.8 per cent, 5.7 per cent, and -0.4 per cent previously).”
S&P’s update comes shortly after Moody’s Investors Service had downgraded India’s GDP growth outlook for 2020 by 0.1% to 5.3%.
UK Government Announces Support on “Unimaginable Scale”
In the UK, the government announced a series of measures to support businesses and households as the virus rapidly spreads. The government led by Prime Minister Boris Johnson will support companies with a 20 billion pound direct package. Also, homeowners won’t need to pay for mortgages for a period of three months, finance minister Rishi Sunak said.
The PM and his finance minister admitted that Britain is facing an economic emergency but they said the government would do everything to support businesses and the economy.
They announced an additional 330 billion pounds of loan guarantees to British companies, worth 15% of GDP. If businesses require more than that, the government will do whatever it takes to support them. Sunak said during a news conference:
“This struggle will not be overcome by a single package of measures or isolated interventions. This national effort will be underpinned by government interventions in the economy on a scale unimaginable only a few weeks ago.”
The outbreak is also affecting the trade talks with the European Union, and it is not clear whether the two will manage to reach consensus by the end of this year.