Amid the growing number of human casualties and the global economic consequences caused by the COVID-19 pandemic, governments in South Asia must step up measures to curb the health emergency, protect their people, particularly the poorest and vulnerable. “Support poor and vulnerable for paving the way for a rapid economic recovery”, says the World Bank in its regional update twice a year.
The latest Economic Focus for South Asia forecasts a severe economic recession in each of the eight countries in the region, caused by the cessation of economic activity, the collapse of trade and increased tension in the financial and banking sector. In this context of rapid and uncertain change, the report presents a forecast, estimating that regional growth will fall to a range between 1.8 and 2.8 percent in 2020, below the 6.3 percent projected six months ago. That would be the worst performance in the region in the last 40 years, with temporary contractions in all the countries of South Asia. In case of prolonged and extensive national blockades, the report warns of the worst case scenario in which the entire region experiences a negative growth rate this year. This deteriorated forecast will persist in 2021 too; growth would be in the range of 3.1 to 4.0%, below the previous estimate of 6.7%.
“The priority for all South Asian governments is to contain the virus spread and protect their people, especially the poorest who face considerably worse health and economic outcomes, the COVID-19 crisis is also an urgent call-to-action moment to pursue innovative policies and jumpstart South Asian economies once the crisis is over. Failure to do so can lead to long-term growth disruptions and reverse hard-won progress in reducing poverty.”Hartwig Schafer, World Bank Vice President for the South Asia Region.
The impact of the pandemic will affect low-income people, especially informal workers in the hotel, retail and transportation sectors who have little or no access to health or social safety nets. The report notes that the COVID-19 crash is likely to reinforce inequality in South Asia. As it developed in the region, the sudden and large-scale loss of low-paid work resulted in a massive exodus of migrant workers from cities to rural areas, raising fears that many of them will not fall again in poverty. Although there are still no signs of a general food shortage, the report warns that a protracted COVID-19 crisis could threaten food security, especially for the most vulnerable.
Once the linkage restrictions close, South Asian governments that adopt expansive fiscal policies combined with monetary stimuli to maintain the flow of credit into their economies. Since many countries in South Asia have had limited fiscal space, these policies target those most affected by the freeze in economic activity. The reports urge governments to adopt temporary spending measures and coordinate with international financial partners to avoid long-term debt levels and unsustainable budget deficits.
“After tackling the immediate COVID-19 threat, South Asian countries must keep their sovereign debt sustainable through fiscal prudence and debt relief initiatives and looking beyond the present crisis, lie great opportunities to expand digital technologies for payment systems and distant learning to unlock remote areas in South Asia.”Hans Timmer, World Bank Chief Economist for the South Asia Region.
Due to the COVID-19 pandemic, the economic situation in countries and regions is fluid and changes from day to day. The analysis in the report is based on the latest national data available as of April 7, 2020.
Due to the COVID-19 pandemic, economic circumstances within countries and regions are fluid and change on a day-by-day basis. The analysis in the report is based on the latest country-level data available as of April 7, 2020. The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $ 160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.