The rapid spread of the virus and its aftermath for the global economy are so unprecedented that it’s hard to make an accurate projection, the World Bank said in its South Asia Economic Focus report, which presented a range forecast, rather than a point forecast, for the first time.
The slowdown is expected to be seen in each of the region’s eight countries, with the growth projected to range between 1.8 and 2.8 percent this year, a dramatic drop from previously forecast 6.3 percent. Even the upper bound of the range forecast would be more than 3 percentage points below average growth since 1980.
“South Asia finds itself in a perfect storm of adverse effects. Tourism has dried up, supply chains have been disrupted, demand for garments has collapsed and consumer and investor sentiments have deteriorated,” the report says.
After what the bank calls “disappointing” growth rates in previous years, in the fiscal year that started on April 1, the country’s GDP growth is projected to stand between 1.5 and 2.8 percent. While the forecast expects India to face the mildest impact of the coronavirus crisis, the negative effect is still set to overtake the signs of a rebound that were seen at the end of 2019.
Other countries in South Asia such as Nepal, Bhutan and Bangladesh are also expected to suffer a steep decline in economic growth. The Maldives is expected to be hit hardest, with its economy possibly contracting up to 13 percent this year. Pakistan, Afghanistan, as well as Sri Lanka could also fall into recession due to the pandemic. However, in the worst-case scenario the whole region would experience a contraction of GDP.
The crisis is likely reinforce inequality in South Asia, with many of the poorest facing higher risk of food insecurity. While there are no signs yet of widespread food shortages so far, the bank warns that protracted lockdowns could deteriorate the situation.
“After tackling the immediate COVID-19 threat, South Asian countries must keep their sovereign debt sustainable through fiscal prudence and debt relief initiatives,” said Hans Timmer, World Bank Chief Economist for the South Asia Region.
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