KATHMANDU / Nepal’s economy is projected to grow by only 0.6 percent in 2021, inching up from an estimated 0.2 percent in 2020 as lockdowns caused by COVID-19 disrupteconomic activity, especially tourism, says the World Bank’s latest South Asia Economic Focus.
Released today, the twice-a-year-regional update notes that South
Asia is set to plunge this year into its worst-everrecession as the devastating
impacts of the pandemic on the region’s economies linger on, taking a
disproportionate toll oninformal workersand pushing millions of South Asians
into extreme poverty.
The
report forecasts a sharper than expected
economic slump across the region, with regional growth expected to contract by
7.7 percent in 2020, after topping 6 percent annually in the pastfive
years.Regional growth is projected to rebound to 4.5 percent in 2021. Factoring
in population growth, however, income-per-capita in the region will remain 6 percent below 2019 estimates,
indicating that the expected rebound will not offset the lasting economic damage
caused by the pandemic.
In previous recessions, fallinginvestment and exports led the
downturn. This time is different asprivate consumption, traditionally the
backbone of demandin South Asia and acore indicator ofeconomic welfare, will
decline by more than 10 percent, further spiking poverty rates.A decline in
remittances is also expected to accelerateloss of livelihoods for the poorest
in some countries.
“The economic
consequences of the pandemic and impact on livelihoods across Nepal is expected
to be the most acute for informal workers or those without social security or
assistance,who are more at risk of fallinginto extreme poverty,”
stated Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal
and Sri Lanka. “Swift action is needed to provide incomes, social protection,
and employment to support them. This includes key investment climate reforms to
promote physical infrastructure and access to finance for the informal sector
to shorten the transition to recovery.”
Informal businesses make up around 50 percent of enterprises in
Nepal and are the main source of income for most of the labor force. Within
this group, urban informal sector workers and self-employed households in urban
areas are more vulnerable than rural households who can fall back on
subsistence farming.Most informal firms operate with limited savings, and
owners may face the difficult choice of staying home and facing starvation
during the lockdown or running their business and risking infection. These
scenarios accentuate financial difficulties as well as the spread of
COVID-19.
The report urges governments to designuniversal social protection
as well as policies that support greater productivity, skills development, and
human capital. In that effort, securing international and domestic financing
will help governments fund crucial programs to speed up recovery.In the
long-term, digital technologies can play an essential role in creating new
opportunities for informal workers, makingSouth Asia more competitive and
better integrated into markets—if countries improve digitalaccess and support
workers totake advantage of online platforms.
“COVID-19 will profoundly transform
Nepal and the rest of South Asia for years to come and leave lasting scars in
its economies. But there is a silver lining toward resilient recovery: the
pandemic could spur innovations that improve South Asia’s future participation
in global value chains, as its comparative advantage in tech services and niche
tourism will likely be in higher demand as the global economy becomes more
digital,”said Hans Timmer, World Bank Chief Economist
for the South Asia Region.
REAL GDP AT MARKET
PRICES IN PERCENT |
|||||
|
Country |
Fiscal year |
2019
(e) |
2020
(f) |
2021
(f) |
2022
(f) |
|
Afghanistan |
December to December |
3.9 |
-5.5 |
2.5 |
3.3 |
|
Bangladesh |
July to June |
8.1 |
2.0 |
1.6 |
3.4 |
|
Bhutan |
July to June |
3.8 |
1.5 |
1.8 |
2.0 |
|
India |
April to March |
6.1 |
4.2 |
-9.6 |
5.4 |
|
Maldives |
January to December |
5.9 |
-19.5 |
9.5 |
12.5 |
|
Nepal |
mid-July to mid-July |
7.0 |
0.2 |
0.6 |
2.5 |
|
Pakistan |
July to June |
1.0 |
-1.5 |
0.5 |
2.0 |
|
Sri Lanka |
January to December |
2.3 |
-6.7 |
3.3 |
2.0 |
|
|
REVISION TO FORECASTS FROM
OCTOBER 2019 IN PERCENT |
||||
|
Country |
Fiscal
year |
2019
(e) |
2020
(f) |
2021(f) |
|
|
Afghanistan |
December to December |
1.4 |
-8.5 |
|
|
|
Bangladesh |
July to June |
0 |
-5.2 |
|
|
|
Bhutan |
July to June |
-1.2 |
-5.9 |
|
|
|
India |
April to March |
-0.7 |
-1.8 |
-16.8 |
|
|
Maldives |
January to December |
0.7 |
-25.0 |
|
|
|
Nepal |
mid-July to mid-July |
-0.1 |
-6.2 |
|
|
|
Pakistan |
July to June |
-2.3 |
-3.9 |
|
|
|
Sri Lanka |
January to December |
-0.4 |
-10.0 |
|
|
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