DHAKA, Jul 8, 2020, Dhaka Tribune. The manufacturing output in the South Asian region is expected to shrink by 2.7% in 2020 as the Covid-19 pandemic sharply weakened the consumption and manufacturing activities in the region, aided by spillovers from a global economic contraction, says a World Bank (WB) report, Dhaka Tribune reported.
Although the WB projected a 2.6% decline in private consumption, it however predicted a 8.4% rise in public consumption.
The global lender made the forecast in its “Global Economic Prospects, June 2020”, which focused on South Asian nations in the wake of the Covid-19 pandemic, released on June 30, 2020.
“The Covid-19 pandemic has sharply weakened consumption and manufacturing activity, and has damaged the tourism and other services industries across the South Asia region. The deterioration in domestic conditions, together with spillovers from a global economic contraction, is expected to result in an output contraction of 2.7% in 2020,” said the report.
Meanwhile, the report also projected growth in 2021 for the region to rebound to around 3% after the effects of the pandemic fade and global headwinds taper.
“Downside risks to the outlook predominate and could materialize as a stronger surge of Covid-19 within the region, an intensification of financial market stress, a deeper pullback in remittance inflows, or a stronger-than-expected global economic contraction,” it added.
As per the findings of the outlook, private consumption has been severely hindered as large-scale lockdowns were instituted in several economies, including Bangladesh, India, Nepal, and Pakistan.
Non-essential business closures stalled retail sales. In rural areas, food and other essential activity deliveries also faced major impediments. Closure of small and medium sized enterprises, a key engine of regional private sector activity, induced substantial loss in employment and private investment, it observed.
Meanwhile, some recent relaxations to these measures have been cautious, given the continued rise in Covid-19 cases.
Poverty to rise
Besides the potential for substantial loss of lives, there is a risk that the pandemic will trigger a long-lasting rise in poverty, especially among the low-income countries in the region, the report said.
“This could occur through food shortages, for example, if supply disruptions raised food prices to unaffordable levels. Estimates for selected areas in the region suggest that those that face food insecurity could be a significant share of population in vulnerable economies,” it added.
Earlier on June 9, WB projected that Bangladesh’s gross domestic product (GDP) is likely to witness a mere 1% growth in GDP in the 2020-21 fiscal year, as the virus-related economic disruption will not end anytime soon.
“In Bangladesh, growth is expected to slow to 1.6%, as the recovery in industrial production is reversed by Covid-19-related disruptions, such as mitigation measures and global exports plunge, and as remittances fall,” said the report titled “Global Economic Prospects 2020.”
Bangladesh’s economy is vulnerable to supply chain disruptions, both domestic and those stemming from imports of intermediate goods, as well as travel-related disruptions to international contractors, it added.
In Bangladesh, large sections of the workforce left major cities to return to their villages due to the pandemic, the report notes.
According to the report, growth was estimated to have slowed to 4.2% for India in the current fiscal year ending in March 2020, while it has been 1.8% for Nepal and -2.6% for Pakistan.
Growth in South Asia is projected to contract by 2.7% in 2020 and is marked by high uncertainty, while it forecast 2.8% GDP for FY21.
Across the region, pandemic mitigation measures will severely hinder consumption and services activity, while high uncertainty about the pandemic will constrain private investment.
Alongside the human toll, there is a risk that the pandemic will trigger a long-lasting rise in poverty, especially among the low-income countries of the region, the World Bank says in its report.
The report predicts that the Covid-19 pandemic is expected to result in a 5.2% contraction in global GDP in 2020 — the deepest global recession in eight decades, despite unprecedented policy support.