World Bank forecasts sharper than expected economic slump in South Asia
By Sarwar Kashani
Srinagar, India, Oct 8 (efe-epa).- The World Bank on Thursday warned that South Asia would plunge into its worst recession due to the devastating impacts of Covid-19, with regional growth expected to contract by 7.7 percent this year after topping 6 percent annually during the past five years.
In its latest report, the bank predicted that India’s economy, the largest in the region, was expected to shrink by 9.6 percent in the fiscal year that ends in March 2021, with a far-reaching impact across the subcontinent.
The bank said the pandemic’s impact on the region’s economies lingered on, causing “a sharper than expected economic slump” across the region that has disproportionately affected informal workers and pushed millions of South Asians into extreme poverty.
“The collapse of South Asian economies during Covid-19 has been more brutal than anticipated, worst of all for small businesses and informal workers who suffer sudden job losses and vanishing wages,” said Hartwig Schafer, the World Bank Vice President for South Asia.
The bank recommended that the governments in the region address the deep-seated vulnerabilities of their informal sectors through smart policies and allocate their scarce resources wisely.
According to the bank’s estimates, three-quarters of all workers in South Asia depend on informal employment, especially in hospitality, retail trade, and transport: the sectors worst affected by lockdowns imposed to curb the virus outbreak.
The report warned that informal workers and firms had little room to cope with the unexpected shocks linked to Covid-19, with the poor facing rising food prices and massive suffering.
The bank noted that previous recessions, falling investment and exports had already caused a downturn in the region.
“This time is different, as private consumption, traditionally the backbone of demand in South Asia and a core indicator of economic welfare, will decline by more than 10 percent, further spiking poverty rates.”
It said that the South Asian countries – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka – were not able to contain domestic virus outbreaks despite imposing lockdowns and travel restrictions March onwards.
The region, the most populous and densely inhabited geographical entity worldwide – with 1.9 billion inhabitants or about one-fourth of the world’s population – has recorded a total of 7.7 million coronavirus infections and nearly 113,000 deaths due to the virus.
The number of Covid-19 infections and deaths in India, with a population of 1.3 billion, dwarfs that of its neighbors.
The overall infection numbers in the country are much higher, with more than 6.8 million cases and nearly 106,000 deaths.
However, the World Bank report noted that due to low testing, social stigma and a young population, the actual extent of the infections in the South Asian region was “highly uncertain, but likely much higher than recorded numbers suggest.”
The bank said the contraction in the annual Indian economy would be steeper than the 3.2 percent estimated in June, mainly due to the declining income of households and small firms.
The Indian economy contracted a record 23.9 percent in the quarter ending in June.
The bank recognized the swift response of the Indian government to the health crisis by implementing a national lockdown to contain the outbreak.
The government also announced a comprehensive policy package to mitigate the impact on the poorest through social protection measures and financial support for small and medium enterprises.
The report said India’s growth would rebound to 5.4 percent in the fiscal year 2021-2022, assuming that the Covid-related restrictions were completely lifted by then.
