Page 102 - Tata_Chemicals_yearly-reports-2019-20

Management Discussion and Analysis

Business Environment commodity prices, which will have a severe impact on economic
Global Economic Outlook activity, including commodity exports. overall, the group of
emerging Market and developing economies is projected to
the global slowdown of the Calendar Year (‘CY’) 2019, caused by contract from 3.7% in CY 2019 to (1.0)% in CY 2020 before picking
the uS-China trade war, Brexit concerns and region-specific crises
in asia and africa, has been exacerbated by the novel coronavirus up to 6.6% in CY 2021.
outbreak of early CY 2020. protecting lives and allowing health India and China are the only two countries in the world to maintain
care systems to cope with the Covid-19 pandemic has required
isolation, lockdowns and widespread closures of non-essential a positive growth rate in CY 2020, though at a low 1.9% and 1.2%,
services, including the manufacturing of most goods. as a result, respectively. In CY 2021, China is expected to lead the global
the global economy is projected to contract sharply by around 3% rebound with 9.2%, following by India with 7.4% and the asean 5
in 2020, worse than it fared during the Financial Year (‘FY’) 2008-09 (Indonesia, Malaysia, the philippines, Singapore and thailand) with
financial crisis, as per the World economic outlook (‘Weo’) of april a collective 7.8%.
2020 released by the International Monetary Fund (‘IMF’).
In China, indicators such as industrial production, retail sales and
the growth forecast is marked down by more than 6% relative fixed asset investment suggest that the contraction in economic
to the october 2019 and January 2020 projections by IMF – an activity in the first quarter could have been about 8% year-on-year
extraordinary revision over such a short period of time. However, (‘YoY’).
global growth is expected to rebound to 5.8% in CY 2021, well
above the trend, reflecting the normalisation of economic activity India’s gdp decelerated to its lowest in over six years in the third
based on inherent strengths. quarter of FY 2019-20 as per KpMg april 2020 report on the
‘potential Impact of Covid-19 on the Indian economy’.
growth in the advanced economies group, where several nations
are experiencing widespread outbreaks and are deploying Key considerations for the outlook:
containment measures, is projected at (6.1)% in CY 2020. the
advanced economies group is forecast to grow at 4.5% in CY 2021. • Amplification channels: Financial markets are sharply
repricing due to an increase in uncertainty and the sudden
growth in the united States (‘uS’) is expected to drop from 2.3% in materialisation of extensive disruptions to economic activity.
CY 2019 to (5.9)% in CY 2020, before recovering to 4.7% in CY 2021. the flight to safe assets and rush to liquidity have put
In the first quarter of FY 2019-20, gdp growth could show a significant upward pressure on borrowing costs and credit
significant impact of Covid-19 due to a complete shutdown of has become scarcer, aggravating financial strains.
economic activities from March 2020. the second and third quarter
of FY 2019-20 are expected to reveal a large adverse impact from • Early indications of severe economic fallout: the economic
falling consumption, business investment and exports.
impact of Covid-19 is already visible in the countries most
affected by the outbreak. For example, in China, industrial
the united Kingdom (‘uK’) economic growth is expected to slow
sharply in CY 2020 amid disruption caused by the coronavirus. production, retail sales and fixed asset investment dropped
dramatically in January 2020 and February 2020.
growth is expected to be (6.5)% in CY 2020 as against 1.4% in
CY 2019. the figure is expected to rebound to 4% in CY 2021.
• A sharp drop in commodity prices: the fast deterioration
Most economies in the group are forecast to contract this year, of the global economic outlook following the pandemic and
including Japan (5.2%), germany (7%), France (7.2%), Italy (9.1%) the breakdown of the opeC+ (organization of the petroleum
and Spain (8.0%). exporting Countries including russia and other non-opeC oil
exporters) agreement have weighed heavily on commodity
among emerging Market and developing economies, all countries prices. Base metal prices, natural gas prices and crude oil
face a health crisis, severe external demand shock and a plunge in prices dropped drastically since mid-March 2020.

100 I Integrated annual report 2019-20