Economic Slowdown: Indian Economy To Hit Further As World Trade Likely To Drop More In 2019, Says RBI

The apex bank, in its monetary policy report, said the forward looking indicators suggest that world trade is likely to slow down further this year.

The Indian economy, which is already witnessing a slowdown, may be hit further with the world trade expected to drop further, according to the Reserve Bank of India (RBI).

New Delhi: The Indian economy, which is already witnessing a slowdown, may be hit further with the world trade expected to drop further, according to the Reserve Bank of India (RBI). The apex bank, in its monetary policy report, said the forward looking indicators suggest that world trade is likely to slow down further this year. "The slowdown in global trade, which began in the later half of 2018, has continued in 2019, with contribution from EMEs slipping into contraction in 2019. Forward looking indicators suggest that world trade is likely to slow down further in 2019," the Reserve Bank of India said. In the US, real GDP growth (q-o-q, annualised) decelerated in Q2:2019 to 2 per cent, after rebounding in Q1, on slumping exports and weak business fixed investment. The RBI further said the Euro area GDP growth slowed down in Q2:2019 as its major constituent economies lost steam amidst lingering uncertainties around Brexit and trade tensions. The German economy contracted in Q2 with a struggling auto industry amidst falling exports; it entered Q3 on a weak note as the manufacturing PMI in September remained in contraction zone, marking the ninth consecutive month of decline in factory activity. GDP growth in Italy stagnated in Q2 as contraction in industry and agriculture activities was offset by an uptick in the services sector, though its high level of debt and ongoing political uncertainty are downside risks. The Japanese economy grew at a slower pace in Q2 than in the preceding quarter as escalating US-China trade tensions and slackening global demand prompted a sharp downward revision in business spending. Real GDP in the UK contracted in Q2 on the back of declining manufacturing activity due to planned early shutdowns of car plants in April following Brexit uncertainty. Risks from a potential hard Brexit deal and evolving global trading conditions cloud the near-term outlook. The Chinese economy decelerated in Q2 (y-o-y) to its weakest pace in nearly 27 years, weighed down by the adverse impact of the prolonged and unresolved trade dispute with the US, and subdued global demand. Among other BRICS economies, the Russian economy is struggling to regain momentum after undergoing a sharp deceleration in Q1. The economies of Brazil and South Africa rebounded in Q2, after witnessing a sluggish start to the year. Economic recovery in Brazil was largely supported by strong fixed investment and construction activity in Q2. The Indonesian economy slowed down to 5.1 per cent (y-o-y) in each of the first two quarters of 2019, pulled down by subdued investment and declining exports, amidst global uncertainty. In Thailand, the downturn that had started in Q1 continued in Q2 (y-o-y), marking the slowest growth in nearly five years. The struggling farm sector, slowing exports and the weakening tourism sector resulted in the slowdown.