Prospects of an economic rebound in South Asia are firming up as growth is set to rise by 7.2 per cent in 2021 and 4.4 per cent in 2022, climbing from historic lows in 2020 and putting the region on a path to recovery, according to the World bank, which recently said growth is, however, uneven and economic activity well below pre-COVID-19 estimates.
That is because many businesses need to make up for lost revenue and millions of workers, most of them in the informal sector, still reel from job losses, falling incomes, worsening inequalities and human capital deficits, said the bank in its twice-a-year regional update.
The latest ‘South Asia Economic Focus: South Asia Vaccinates’ said the region is set to regain its historical growth rate by 2022. Electricity consumption and mobility data is a clear indication of recovering economic activity. India, which comprises the bulk of the region’s economy, is expected to grow more than 10 percent in the fiscal year 2021-22—a substantial upward revision of 4.7 percentage points from January 2021 forecasts.
The outlook for Bangladesh, Nepal, and Pakistan has also been revised upward, supported by better than expected remittance inflows: Bangladesh’s gross domestic product (GDP) is expected to increase by 3.6 per cent in 2021; Nepal’s GDP is projected to grow by 2.7 per cent in fiscal 2021-22 and recover to 5.1 per cent by 2023; Pakistan’s growth is expected to reach 1.3 per cent in 2021, slightly above previous projections.
The improved economic outlook reflects South Asian countries’ efforts to keep their COVID-19 caseload under control and swiftly roll out vaccine campaigns. Governments’ decisions to transition from widespread lockdowns to more targeted interventions, accommodating monetary policies and fiscal stimuli—through targeted cash transfers and employment compensation programs—have also propped up recovery, the report noted.
“We are encouraged to see clear signs of an economic rebound in South Asia, but the pandemic is not yet under control and the recovery remains fragile, calling for vigilance,” said Hartwig Schafer, World Bank vice president for the South Asia Region.
“Going forward, South Asian countries need to ramp up their vaccination programs and invest their scarce resources wisely to set a foundation for a more inclusive and resilient future,” he was quoted as saying in a press release from the organisation.
The report recommends that governments develop universal social insurance to protect informal workers, increase regional cooperation, and lift customs restrictions on key staples to prevent sudden spikes in food prices.
“South Asia has stepped up to vaccinate its people, but its healthcare capacity is limited as the region only spends 2 per cent of its GDP on healthcare, lagging any other region. The main challenge ahead is to reprioritize limited resources and mobilize more revenue to reach the entire population and achieve full recovery,” said Hans Timmer, World Bank chief economist for the region.