Due to COVID-19 outbreak, Pakistan’s economy would actually perform even worse than what previous estimates had warned about, The World Bank forecast said on Monday.
In its latest report, ‘Global Economic Prospects’, the World Bank assessed that the country’s economy was likely to go into the red this fiscal year and would be unable to recover even next year.
It forecast a negative GDP growth of -2.6pc for the current fiscal year (2019-20) and -0.2pc during the next (20-21).
“Pakistan (-2.6pc in FY2019/20) and Afghanistan (-5.5pc in 2020) are both projected to experience contractions as mitigation measures are anticipated to weigh heavily on private consumption. Key labor-intensive export sectors are expected to contract sharply and recover only slowly”, the Bank said in its report.
This would be an even poorer performance when seen on the basis of World Bank’s April 12 forecast of -2.2pc and -1.3pc growth and an eventual recovery to 0.9pc.
This comes in sharp contrast to recent official estimates by authorities that put GDP going down by -0.4pc during the current year and returning to 2.3pc growth during the next fiscal year.
Over the longer horizon, the deep recessions triggered by the pandemic are expected to leave lasting scars through lower investment, an erosion of human capital through lost work and schooling, and fragmentation of global trade and supply linkages.
All other major economies in the region — India, Bangladesh, Nepal and Bhutan — would remain in the growth mode during fiscal 2019-20, even though all would suffer from the pandemic’s impact, the report said.
In India, growth is estimated to have slowed to 4.2pc in 2019/20, which ended in March. Output is projected to contract by 3.2pc in 2020/21, when the impact of the pandemic will largely hit and stringent measures to control the spread of the virus will heavily curtail activity, despite some support from fiscal and monetary stimulus.
“Many emerging and developing economies were already experiencing weaker growth before this crisis; the shock of COVID-19 now makes the challenges these economies face even harder” the World Bank’s report said.
Growth in Bangladesh (1.6pc in 2019/20) and Nepal (1.8pc in 2019/20) is expected to decelerate markedly in 2020 due to pandemic-related disruptions, including mitigation measures and sharp falls in exports and remittance inflows.
Nepal and Maldives will be hard hit by a drop in tourism.
The World Bank said the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it had “plunged the global economy into a severe contraction”.
The global economy will shrink by 5.2pc this year.
This would represent the deepest recession since World War II, with the largest fraction of economies experiencing declines in per capita output since 1870.
It noted that although South Asia had recorded a smaller number of Covid-19 cases than other regions, tourism activity has faded, and domestic pandemic mitigation measures were weighing heavily on short-term economic activity.
Deteriorating economic conditions in advanced economies and major emerging market economies were impacting export-related industries.
In addition, the incidence of Covid-19 cases was still rising rapidly in the region.
In South Asia, industrial and services activity has plummeted as a result of the mitigation measures and the collapse in global demand. Trade activity has sharply fallen. Consumption has been severely hindered as nationwide lockdowns were instituted in several economies.