World, Economy, Asia - Pacific

COVID-19 pandemic darkens South Asia: World Bank

Report notes disruption in economic activities, movements brought South Asian region to near standstill

Riyaz ul Khaliq   | 08.10.2020
COVID-19 pandemic darkens South Asia: World Bank


ANKARA

The COVID-19 pandemic hit South Asian nations late but hard, said a report by the World Bank released Thursday.

The report prepared by the Office of the Chief Economist for the South Asia Region (SARCE) and the Macroeconomics, Trade and Investment (MTI) Global Practice says the pandemic is yet not under control in the region – home to nearly 2 billion people.

The crisis brought South Asia to a near standstill, the report said.

However, the report acknowledged the governments in the region took early containment measures against the pandemic.

“But not all countries were able to contain the domestic spread of COVID-19. Due to low testing, social stigma, and a young population, the actual extent of COVID-19 infections is highly uncertain, but likely much higher than recorded numbers suggest,” it said.

Besides hitting movement and economic activity, the report said the lockdown measures “triggered massive supply disruptions.”

“Information from high-frequency variables, combined in activity indicators, show an unprecedented contraction,” it added.

While the activity dropped by 40% in Pakistan in April, other countries saw a two-thirds drop.

Although the activity has recovered subsequently across the region, “it remained below pre-COVID levels in August.” All the countries witnessed contraction in GDP.

“The collapse in activity was widespread. The economic disruption is even visible from space: South Asia has darkened since March,” the report explained.

“Between March and August, nighttime light intensity declined in more than three-quarters of South Asia’s districts. In August, the average nighttime light intensity across districts was still 10% below its level a year earlier,” the study said. “Mobility declined strongly in nearly all districts, as a result both of national containment measures and local COVID-19 infections.”


'Situation still fragile'

Referring to the state of COVID-19 in India, the report showed there is heterogeneity across districts due to voluntary reductions in mobility due to higher local prevalence of COVID-19.

“During the national lockdown in India, districts with more recorded COVID-19 infections per capita experienced larger declines in mobility and nighttime lights.”

Although the local governments “proactively stabilized economic activity through monetary easing, fiscal stimulus, and supportive financial regulation,” the report added: “The situation is fragile amid weak buffers and exhausted policy tools in some countries.”

The report also said that it is yet not clear “whether lockdowns can effectively mitigate a pandemic in countries with a large share of urban poor and densely populated cities.”

“In some cases, they may even be counterproductive.”

The report maintained that the decline in demand and supply disruptions generated by the pandemic and the policies required to contain its spread “have resulted in severe reductions in incomes in the South Asia region.”

“An effective policy response will require a clear understanding of which households and firms are most in need of assistance, and how to reach them,” it added.

“Finding ways to assist these workers will be critical to addressing the welfare losses from the pandemic.”

However, it added that the COVID-19 response “cannot only focus on supporting incomes.”

“The survival of many informal sector firms is threatened by what is hoped to be a temporary shock to their markets and access to supplies. These firms tend to be quite small and lack the savings and the financial access to keep afloat during this extended crisis,” the report added.

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