In South Africa, the bank now expects GDP in 2020 to contract by 7.0%, compared to the 6.1% contraction forecast in April. "The RBI will continue to remain vigilant and in battle readiness to use all its instruments and even fashion new ones, as recent experience has demonstrated, to address dynamics of the unknown future". Today's trials will be traumatic but together we will triumph, says Das.
"Three-month moratorium we allowed on term loans&working capitals we allowed certain relaxations". The Reserve Bank of India on Friday has announced that it has reduced repo rate by 40 basis points to 4 per cent and extended the loan repayment moratorium for another three months up to August 31.
This could come as a major relief to people who have to pay EMIs home loans, auto loans etc, and are facing pay cuts or job losses in the wake of the COVID-19 lockdown.
There will be a gradual revival of activity and demand by the second half of FY-2021, said RBI governor. This will have a rollover facility to upto one year.
SBI note said the market was expecting a clarity on the moratorium, consultancy firm EY made it more explicit. This will provide additional liquidity support to the MSME sector. The downside risks to the economy are getting sharper, as recognised by the RBI Monetary Policy Committee.
Australia Threatens WTO Action As Dispute With China Deepens
However, trade minister Simon Birmingham said Australia would not retaliate against China, the country's biggest trading partner. The report also predicted that state media could also encourage consumer boycotts of popular Australian brands.
Deputy Governor Rashad Cassim noted that when it came to Covid-19 measures around the world, "policymakers talk about relief rather than stimulus".
Beyond its timing, there was no surprise in the rate cut move by the RBI on Friday, and there exists a scope for more cuts of up to 1 percentage point because of the troubles on the growth front, analysts said. Job losses are also expected to be widespread, the governor said. He added that gross domestic product will remain in negative territory this year with some pickup in the pulses segment. A ray of hope is also brought in from the normal south-west monsoons this year, added Shaktikanta Das.
Speaking on the condition of the economy, the governor said that there has been a collapse in demand in both urban and rural demand since March 2020.
Das said the combined impact of demand compression and supply disruption will depress economic activity in the first half of the April 2020 to March 2021 financial year. If economic growth is expected to be negative, how can companies generate enough revenue and operating profits to pay off such dues in the current fiscal?
A decisive cut to South African interest rates by the South African Reserve Bank has sparked a rally in the value of the South African Rand, as investors saw the move as ultimately being supportive of an economy that is under severe pressure owing to a strict coronavirus lockdown. In an off-cycle meeting of the Monetary Policy Committee (MPC), the decision was taken unanimously to cut repo to support growth.