Investment will take years to recover

If the monthly activity data are anything to go by, GDP data for Q2 (Q1 of FY20/21) due at the end of the month will show that investment slumped by more than 30% y/y. That will prove the bottom given the lifting of lockdown measures since then. But the outlook remains bleak. The government has offered loan guarantees to SMEs but, in reality, firms will remain cautious given the likely damage to balance sheets and the high chance of more localised lockdowns as new virus cases remain high. And despite aggressive policy loosening, banks are likely to remain risk-averse with lending decisions given that non-performing loans are set to jump once the debt moratorium is lifted. Bringing all of this together, we think that investment will remain below the pre-virus level until 2022, and below its pre virus trend for many years to come.