S&P slashes emerging market forecasts, warns of permanent scars

Rating agency S&P Global cut its emerging market growth forecasts on Monday, predicting a 4.7 percent slump on average this year due to the coronavirus and warned that all countries would be left with permanent scars too.

The firm said the downward GDP revisions mostly reflected the overall worsening pandemic for many emerging markets and a larger hit to foreign trade compared to its last set of expectations in April that predicted a 1.8 percent contraction.

"We project the average EM GDP (excluding China) to decline by 4.7 percent this year and to grow 5.9 percent in 2021. Risks remain mostly on the downside and tied to pandemic developments," S&P said.

It added that there would permanent output losses from the pandemic for all emerging markets, with the gap relative to pre-COVID GDP path as large as 11 percent in India, 6 percent-7 percent in most of Latin America and South Africa, 3 percent-4 percent in most of Emerging Europe, and 2 percent in Malaysia and Indonesia.