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Global GDP Contraction is on Worst Phase: Motilal Oswal Financial Services

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The global real GDP contracted by 7.2 per cent year-on-year in the second quarter of current calendar year, Motilal Oswal Financial Services said in its EcoScope report released on Friday.

Global real private final consumption expenditure (PFCE) declined at record 11 per cent last quarter (versus 2.1 per cent decline in 1Q CY09) while global real gross capital formation (GCF) fell only 6 per cent (versus 16 per cent in 1HCY09).

The global real government final consumption expenditure (GFCE) remained stagnant in 2Q CY20, said the report.

India’s real PFCE contracted by 26.7 per cent and real GFCE saw a growth of 16.4 per cent in 2Q CY20. In terms of real GCF, India witnessed a decline of 47.5 per cent in Q2 CY20.

In an effort to provide a quarterly update on global GDP and its key components, Motilal Oswal collected data on 39 nations.

These include 19 euro areas (EA) countries, comprising 86 per cent of the world economy, 94 per cent of advanced economies (AEs) and 73 per cent of emerging and developing economies (E&DEs).

Real GDP in AEs contracted 11 per cent while it shrank 14 per cent in E&DEs, excluding China. Interestingly, China was the only nation in the sample of 39 nations, which posted growth in 2Q CY20.

Taiwan posted the slowest decline of only 0.2 per cent while India posted the worst decline of 24 per cent year-on-year last quarter.

The record decline in PFCE is not a surprise amid the economic lockdowns and social distancing practices due to COVID-19 globally. It has declined in all 39 nations, ranging from minus 2.9 per cent in China to minus 28 per cent in Singapore.

A further break-up of total fixed investments by private and public (government and public corporations) sector suggests that while private investments have fallen at an average of 15 per cent, public sector’s investments have declined 5 per cent in 2Q CY20.

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