In a recent report by the World Bank, South Asian countries, including Pakistan and Afghanistan are likely to record their worst economic growth performance in 40 years due to the coronavirus pandemic.
According to the latest report, “South Asia Economic Focus” – a flagship publication of the World Bank forecasts a sharp economic slowdown in the South Asian region prompted by curbed economic activity, diminishing trade, and higher stress in the financial and banking sectors.
“Pakistan, which has already experienced low growth rates in recent years, could well fall into a recession”, noted the report. With 1.8% population growth, that would imply a painful decline in per capita income, it added.
With the tourism sector declining, supply chains have been disrupted, demand for garments has collapsed and consumer and investor sentiments have deteriorated, the country has been in such a bad economic condition almost 68 years.
The WB on Sunday projected a decline in Pakistan’s national output in the range of 2.2% to 1.3%, which will also hit personal incomes badly in contrast to week’s estimates of 1% growth in the current fiscal year 2019-20.
The report also noted that the food prices might go up “It is extremely worrisome as it threatens food security for people with low income,” said the World Bank. These are the steepest estimates so far given by any multilateral agency and local authorities and independent experts.
These terrifying reports by the World Bank demand immediate response from the federal government and the State Bank of Pakistan that are responding to the crisis in a fragmented manner.
Instead of using its in-house expertise, the planning Commission has outsourced some of its work to the United Nations Development Programme which speaks volumes about the preparedness of the government to deal with this crisis.
The export sector is hit the worse. 54% of manufacturing exports are related to the textile and food, beverages, and tobacco sub-sectors. Bangladesh and Pakistan, the main exporters, will suffer disproportionately, in part because the countries that suffered the largest outbreaks are also the largest buyers of garments from these two countries.
If the coronavirus spreads further and lockdown measures remain in place for a long period, it will become more challenging to guarantee food security, especially for the most vulnerable in the population, said the WB.
Although the PM has spoken about handling the lockdown well, a report notes that “In India, Bangladesh, and Pakistan, the time between the announcement of a suspension of inland passenger transport and its enforcement was less than a day, which created chaos as migrants scrambled to get back to their provinces, exacerbating the crowding and making enforcement of social distancing impossible”.
With high levels of food insecurity and widespread malnutrition among children in Pakistan, the consequences of the virus spreading widely could reverse the recent positive trends in poverty and prove to be catastrophic.
The State Bank of Pakistan maintained a tight monetary stance during this period, keeping the policy rate at 13.25% to dampen inflationary expectations. However, as the COVID-19 pandemic spread, it reduced the policy rate to 11.0 per cent in March 2020, a report read.
Another serious problem for Pakistan is the Public debt which is already high in most countries and the pandemic is expected to slash growth and tax revenues.
Other than Pakistan, the World Bank predicts that Sri Lanka, Nepal, Bhutan, and Bangladesh will also see a sharp fall in their economic growth. To minimize short-term economic pain, World Bank urged the 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.
Via: Express Tribune