Economic growth in South Asian countries is expected to rebound to a stronger-than-expected 6.8 per cent in 2021 and India's GDP is predicted to grow at 8.3 per cent, according to the latest World Bank report on global economy recovery post Covid-19 pandemic.
In its June 2021 Global Economic Prospects report released on Tuesday, the World Bank noted the surge of COVID-19 cases in South Asia, especially India and the slow pace of vaccination in several countries. It also said that the recovery has done little to narrow the gap with pre-pandemic trends. The GDP in 2022 is expected to be 9 per cent lower than projected prior to the pandemic.
In India, the growth for FY 2021-22 is forecast at 8.3 per cent, supported by plans for higher spending on infrastructure, rural development, and health, and a stronger-than-expected recovery in services. The report noted however that the better growth prospects have masked significant damage to economic activity from COVID-19.
The growth for FY 2022-23 is expected to slow to 7.5 per cent, the World Bank predicted
In Bangladesh, the recovery is expected to be gradual, with a growth of 3.6 per cent in FY 2020-21 and 5.1 per cent in FY 2021-22, as private consumption is supported by normalising activity, moderate inflation, and rising garment exports.
The report predicted that Pakistan is expected to grow 1.3 per cent in FY 2020-21.
According to the report, an enormous second Covid-19 wave is undermining the rebound in services and manufacturing activity in India. High-frequency data, including a renewed drop in foot traffic around work and retail spaces, suggests that activity is again collapsing.
On the other hand, economic recoveries in Bangladesh and Pakistan also face hurdles from the recent rise in Covid-19 cases and related restrictions. Sri Lanka, facing resurging Covid-19 cases and mounting government debt, has experienced significant exchange rate depreciation since the onset of the pandemic.
The World Bank noted that fiscal and monetary policies remain accommodative in South Asia following an aggressive policy response in 2020 that included cuts in interest rates, increases in government expenditure, the extension of loans and guarantees, and steps to ensure financial stability.
The report found that the Covid-19 pandemic is expected to leave a legacy of higher poverty in the region with tens of millions of people anticipated to fall below the USD 1.90-a-day extreme poverty line this year. Further deprivation could come from higher food prices as global agricultural commodities have risen 30 per cent over the past year.
"With the recovery in early stages and the pandemic continuing to spread, the outlook is highly uncertain. Downside risks stem from high government debt, upward pressure on food prices, financial sector challenges, and the uncertain trajectory of Covid-19 and vaccination," it said.
Furthermore, the intersection of higher food prices and outbreaks of Covid-19 poses significant risks to vulnerable communities.
( With inputs from ANI )
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