NEW DELHI - South Asian countries could see their lowest growth in 40 years as lockdowns to contain the coronavirus pandemic freeze large parts of the domestic economies in the world’s most populous region, according to a World Bank report.
The South Asia Economic Focus report estimates that regional growth is likely to fall to between 1.8 and 2.8% in 2020, a steep drop from the 6.3% projected six months ago.
“South Asia finds itself in a perfect storm. Tourism has dried up, supply chains have been disrupted, demand for garments has collapsed, consumer and investor sentiments have deteriorated, international capital is being withdrawn and inflows of remittances are being disrupted,” according to the report.
South Asian countries have reported relatively low numbers of coronavirus infections compared to several parts of the world – about 14,500, with India, the largest country in the region accounting for more than 8,000.
But most countries in the region have imposed lockdowns amid worries that densely packed urban slums in cities like Mumbai and Dhaka, and a poor health infrastructure, will leave them struggling to cope if the infection spreads. There are also worries that low levels of testing do not reflect an accurate picture of the spread of the virus.
“The harsh reality of inequality in South Asia is that poor people are more likely to become infected with the coronavirus, as social distancing is difficult to implement for them,” according to the World Bank. It says they also will be the most vulnerable to job losses and spikes in food prices.
Home to one-quarter of the world’s population, South Asia has pulled millions out of poverty in recent decades, but an economic setback of the scale that it now faces could reverse much of those gains.
While India, Sri Lanka, Nepal, Bhutan and Bangladesh will see a sharp fall in economic growth, Pakistan, Afghanistan and the Maldives are expected to fall into recession.
India, the largest country in the region, was poised to recover from an economic slump when the pandemic shuttered the entire country. The lockdown is likely to be extended until the end of the month, though the government is considering allowing a few industries to resume operations in areas that are considered safe.
However, it could take months for economies to get back on track even after lockdowns are lifted. “Factories will not operate at full capacity anytime soon. Production is not going to revive; demand is not going to revive immediately. It is not as if people will suddenly return to shopping malls,” says economist Arun Kumar based in New Delhi. “Therefore, there will be huge joblessness and poverty.”
In Bangladesh, where the economy has powered ahead in recent years on the back of a thriving garment industry, most factories are shuttered amid a lockdown that has been extended till April 25. The country ranks behind only China as a supplier of clothes to Western countries, but tens of thousands of workers face layoffs as orders worth billions of dollars are cancelled or put on hold, according to the Bangladesh Garment Manufacturers and Exporters Association. The sector employs four million workers, mostly women.
The World Bank has called for countries in the region to look at more measures to support unemployed workers, as well as businesses.
India has announced a $23 billion economic package of food and cash transfers to poor people, but economists warn that it will not be enough to alleviate the distress caused by widespread joblessness.
“This is a crisis far deeper than the 2008 financial crisis,” says Santosh Mehrotra, an economist at New Delhi’s Jawaharlal Nehru University. Pointing to the region’s largest country he says, “COVID is going to take India’s growth rate down to probably zero or into negative territory.”