Bangladesh and other South Asian nations are likely to record their worst growth performance in four decades this year due to the coronavirus outbreak, the World Bank said on Sunday, reports bdnews24.com
The South Asian region, comprising eight countries, is likely to show economic growth of 1.8% to 2.8% this year, the World Bank said in its South Asia Economic Focus report, well down from the 6.3% it projected six months ago.
Bangladesh’s economy is expected to grow 2.0% to 3.0% in fiscal 2020, followed by 1.2% to 2.9% in fiscal 2021, according to the World Bank.
India’s economy, the region’s biggest, is expected to grow 1.5% to 2.8% in the fiscal year that started on April 1. The World Bank has estimated it will grow 4.8% to 5% in the fiscal year that ended on March 31.
“The extent of the impact of the pandemic will depend on the duration of the crisis and the mitigation measures taken,” said Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan.
“The Bangladesh government has acted quickly with public health directives, stimulus package, and scaled-up social protection programs. Earlier this month, the World Bank approved a $100 million financing to help detect, prevent, and respond to the COVID-19 outbreak and protect the people. We are committed to help Bangladesh tackle the pandemic, accelerate recovery, and build resilience.”
The impact of the coronavirus will hit hard low-income people, especially informal workers in the hospitality, retail trade, and transport sectors who have limited or no access to healthcare or social safety nets. The report notes that the COVID-19 shock will likely reinforce inequality in South Asia. The report predicts a decline in national and global demand for manufactured goods in Bangladesh, particularly in the garment sector, risks creating unemployment and deepen poverty. The urban poor will be hardest hit while the number of additional poor will be higher in rural areas. The national shutdown will impact private consumption.
While growth is expected to recover over the medium term, downside risks remain, particularly from a domestic outbreak of COVID-19 and fragilities in the financial sector, the report noted.
As played out across the region, the sudden and large-scale loss of low paid work has driven a mass exodus of migrant workers from cities to rural areas, spiking fear that many of them will fall back into poverty. While there are no signs yet of widespread food shortages, the report warns that a protracted COVID-19 crisis may threaten food security, especially for the most vulnerable.
In the short term, the report recommends preparing weak healthcare systems for greater COVID-19 impacts, as well as providing safety nets and securing access to food, medical supplies, and necessities for the most vulnerable.
To minimise short-term economic pain, the World Bank called for countries in the region to announce more fiscal and monetary steps to support unemployed migrant workers, as well as debt relief for businesses and individuals.
Bangladesh has so far unveiled a Tk 727.5 billion stimulus package to mitigate the potential economic fallout from the coronavirus outbreak.
“The priority for all South Asian governments is to contain the virus spread and protect their people, especially the poorest who face considerable worse health and economic outcomes,” said senior World Bank official Hartwig Schafer.
“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.”
Once lockdown restrictions are loosened, the report recommends adopting expansionary fiscal policies combined with monetary stimulus to keep credit flowing in South Asian economies.
Since many South Asian countries have limited fiscal space, these policies should target people worst hit by the freeze on economic activity, according to the World Bank.
The report urges governments to adopt temporary spending measures and coordinate with international financial partners to avoid unsustainable long-term debt levels and fiscal deficits.
