The World Bank stated that South Asian countries, including Pakistan are likely to record their worst economic growth performance in 40 years due to the coronavirus pandemic.
In a report released by the World Bank stated that countries like Pakistan, Afghanistan and the Maldives are expected to face worst recession.
The report highlighted that Pakistan, which has been experiencing low growth rates in recent years, could fall into a recession. With 1.8% population growth, that would imply a painful decline in per-capita income.
The report further stated that South Asia is facing disorder of adverse effects as tourism sector has declined, supply chains have been disrupted, demand for garments has collapsed and consumer and investor sentiments have deteriorated.
The report noted that that there are chances that food prices will increase under the current circumstances. It is extremely worrisome as it threatens food security for people with low income.
World Bank forecast that Sri Lanka, Nepal, Bhutan and Bangladesh will also see a sharp fall in their economic growth along with Pakistan. To minimize short-term economic pain, World Bank called for 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.
According to data on World Bank website, the rapid spread of the COVID-19 virus since February 2020 has brought economic activity to a near-halt. Most of the country has been placed under a partial lockdown. The shutting down of non-essential businesses and domestic supply chain disruptions are having a significant impact on wholesale and retail trade and transport, storage and communication, the largest sub-sectors of the services sector.
The drop in domestic and global demand is also affecting the industrial sector, which is hit by both supply and demand shocks.
The report revealed that the output of large-scale manufacturing, which accounts for around 50 per cent of industrial output, contracted by 3.4 percent in FY20. However, the country’s agriculture sector registered growth in the rice and livestock sub-sectors.
It stated that average inflation increased to 11.8 percent during this year reflecting upward adjustments in administrated prices and exchange rate depreciation pass through.
The State Bank of Pakistan (SBP) maintained a tight monetary stand during this period, keeping the policy rate at 13.25 percent to reduce inflationary expectations. However, it reduced the policy rate to 11.0 percent in March 2020 as the COVID-19 pandemic spread.