KATHMANDU, JUNE 09
The latest World Bank report says growth in South Asia is expected to rebound to 6.8 per cent this year, 3.6 percentage points higher than previously projected, partly reflecting stronger-than-expected momentum from the end of last year.
In its latest Global Economic Prospects report, out today, the 189-country anti-poverty agency has said India accounts for most of the upgrade as strong services sector activity more than offsets the economic effects of the worsening pandemic. The outlook is underpinned by a rebound in private consumption. The recovery, however, has done little to narrow the gap with pre-pandemic trends. In 2022, GDP is expected to be nine per cent lower than projected prior to the pandemic.
Debt relief under the Debt Service Suspension Initiative will provide additional fiscal space for Nepal, Afghanistan, Maldives and Pakistan, the report states.
Nevertheless, the pandemic is expected to leave a legacy of higher poverty in the region.
Tens of millions of people are anticipated to fall below the $1.90-a-day extreme poverty line this year. Further deprivation could come from higher food prices as global agricultural commodities have risen 30 per cent over the past year.
Adding to the adverse impacts, fixed investment is expected to be 10 per cent below pre-pandemic trends, schools have been shut for about onethird of the duration of the pandemic, and an estimated one-tenth of labour hours have been lost.
Meanwhile, the outlook for global growth this year has been upgraded as the World Bank has predicted that COV- ID-19 vaccinations and massive government stimulus in rich countries will power the fastest worldwide expansion in nearly five decades.
In has estimated that the world economy will grow 5.6 per cent this year, up from the 4.1 per cent it forecast in January.
The global economy last year shrank 3.5 per cent as the coronavirus pandemic disrupted trade and forced businesses to close and people to stay home.
The projected expansion would make 2021 the fastest year of growth since 6.6 per cent in 1973.
But the 2021 rebound will be uneven, the bank predicts, led by rich countries such as the United States that could afford to spend vast amounts of taxpayer money to support their economies: 90 per cent of advanced economies are expected to return to pre-pandemic levels next year - measured by income per person - versus just a third of developing countries.
The World Bank is calling for wider distribution of COVID vaccines to low-income countries, where inoculations have gone slowly.
The bank expects the US economy to expand 6.8 per cent in 2021, up from the 3.5 per cent it forecast in January; the world's biggest economy shrank 3.5 per cent last year as COVID-19 brought economic activity to a near standstill in the spring. But an aggressive vaccine rollout, along with low interest rates and massive government spending revived the economy.
China - the world's number two economy and the first to emerge from COVID recession - is forecast to grow 8.5 per cent in 2021 after expanding just 2.3 per cent last year.
The 19 European countries that share the euro currency are collectively expected to 4.2 per cent, reversing last year's 6.6 per cent drop. And Japan is forecast to post 2.9 per cent growth this year after registering a 4.7 per cent drop in economic output last year.
The bank notes downside risks to its forecast, including the possibility that the pandemic lingers, that inflation flares and forces central banks to raise interest rates and that countries struggle with high debt burdens.
A version of this article appears in the print on June 9, 2021, of The Himalayan Times.