Islamabad
More than a year into the Covid-19 pandemic, the developing economies of East Asia and the Pacific (EAP) are facing a markedly uneven recovery, according to the World Bank’s latest economic update for the region.
Only China and Vietnam are experiencing a V-shaped rebound where output has already surpassed pre-pandemic levels.
In the other major economies, output remained on average around 5 percent below pre-pandemic levels. Hardest hit of all have been the Pacific Island countries.
Economic performance has depended on the effectiveness of virus containment, the ability to take advantage of the revival of international trade, and the capacity of governments to provide fiscal and monetary support.
According to the update, in 2020, poverty in the region stopped declining for the first time in decades.
An estimated 32 million people in the region failed to escape poverty (at a poverty line of $5.50/ day) due to the pandemic.
“The economic shock caused by the Covid-19 pandemic has stalled poverty reduction and increased inequality,” said Victoria Kwakwa, Vice President for East Asia and the Pacific at the World Bank.
“As countries begin to rebound in 2021, they will need to take urgent action to protect vulnerable populations and ensure a recovery which is inclusive, green and resilient.”
Growth in the region is expected to accelerate from an estimated 1.2 percent in 2020 to 7.5 percent in 2021. But we are likely to see a three-speed recovery. China and Vietnam are expected to grow even more strongly in 2021, by 8.1 percent and 6.6 percent, respectively, up from 2.3 percent and 2.9 percent in 2020. Other large economies, more scarred by the crisis, will grow about 4.6 percent on average, slightly slower than pre-crisis growth.
Recovery is expected to be particularly protracted in tourism-dependent Island economies.
The report estimates that US stimulus could add 1 percentage point on average to the growth of countries in the region in 2021 and advance recovery by about three months on average.
Risks to the outlook come from slow implementation of Covid-19 vaccines, which could slow growth by as much as 1 percentage point in some countries.
The report calls for action to contain the disease, support the economy, and green the recovery.
It warns that with current stocks and allocation of vaccines, industrial countries would achieve more than 80 percent population coverage by the end of 2021, while developing countries will achieve only about 55 percent coverage.
In many EAP countries, relief is less than earning losses, stimulus has not fully remedied deficient demand, and public investment is not a significant part of recovery efforts, even as public debt has increased on average by 7 percentage points of GDP.
And “green” measures are outstripped by “brown” activities in the stimulus packages across the region: on average only one-in-four recovery measures taken by countries in the region are climate friendly. —TLTP
