KUALA LUMPUR (July 14): S&P Global Ratings has projected the gross domestic product (GDP) of Malaysia and Indonesia in 2020 to contract by 2% respectively from pre-pandemic estimates — a relatively smaller quantum than other emerging markets.

In a report titled “Emerging Markets: The Long Road To A New Normal”, it forecasted permanent output losses for all emerging markets, with the gap relative to pre-Covid-19 GDP path as large as 11% in India, 6% to 7% in most of Latin America and South Africa, and 3% to 4% in most of emerging Europe.

The losses are a result of the worsening Covid-19 pandemic and a steeper fall in exports.

S&P Global Ratings also expected the average emerging market GDP, excluding China, to contract by 4.7% this year, and then to grow 5.9% in 2021.

“Better financial conditions and a gradual recovery in key trading partners are supporting the return to growth in emerging markets, but investor sentiment remains fragile," it said.

It noted that the evolution of the pandemic and the effectiveness of policy response will be key in influencing the recovery path.

“The starting point of each emerging market, the dynamism and adaptability of the private sector, and external factors also matter for recovery prospects,” S&P Global Ratings added.