World Bank sees worst economic slump in South Asia in 40 years

India and other South Asian countries are likely to record their worst growth performance in four decades this year due to the coronavirus outbreak, the World Bank said on Sunday.

The South Asian region, comprising eight countries, is likely to show economic growth of 1.8% to 2.8% this year, the World Bank said in its South Asia Economic Focus report, well down from the 6.3% it projected six months ago.

India’s economy, the region’s biggest, is expected to grow 1.5% to 2.8% in the fiscal year that started on April 1. The World Bank has estimated it will grow 4.8% to 5% in the fiscal year that ended on March 31.

“The green shoots of a rebound that were observable at the end of 2019 have been overtaken by the negative impacts of the global crisis,” the World Bank report said.

Other than India, the World Bank forecast that Sri Lanka, Nepal, Bhutan and Bangladesh will also see sharp falls in economic growth.

Three other countries - Pakistan, Afghanistan and the Maldives - are expected to fall into recession, the World Bank said in the report, which was based on country-level data available as of April 7.

Measures taken to counter the coronavirus have disrupted supply chains across South Asia, which has recorded more than 13,000 cases so far - still lower than many parts of the world.

India’s lockdown of 1.3 billion people has also left millions out of work, disrupted big and small businesses and forced an exodus of migrant workers from the cities to their homes in villages.

In the event of prolonged and broad national lockdowns, the report warned of a worst-case scenario in which the entire region would experience an economic contraction this year.

To minimize short-term economic pain, the 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.

India has so far unveiled a $23 billion economic plan to offer direct cash transfers to millions of poor people hit by its lockdown. In neighbouring Pakistan, the government has announced a $6 billion plan to support the economy.

“The priority for all South Asian governments is to contain the virus spread and protect their people, especially the poorest who face considerable worse health and economic outcomes,” said senior World Bank official Hartwig Schafer. (Reporting by Manoj Kumar; Editing by Aditya Kalra and Hugh Lawson) Meanwhile, Canadian lawmakers passed a wage subsidy programme Saturday heralded as the largest economic measure in the country since World War II, to help businesses and their employees get through the coronavirus crisis.

Parliament is suspended but held an exceptional session in the middle of Easter weekend to adopt the Can$73 billion (US$52 billion) programme, which aims to pay companies 75 per cent of their employees’ salaries to avoid massive layoffs.

Prime Minister Justin Trudeau attended the session. He had been in isolation in his home for a month after his wife contracted the virus.

Apart from leaders of the main parties, only about 30 MPs out of 338 sat in order to comply with social distancing orders.

The House of Commons passed the bill in the afternoon, following in the evening by the Senate.

Trudeau, referring to Canada’s sacrifices in both world wars, stressed that the fight against the virus “is not a war,” but “that doesn’t make this fight any less destructive.” “The front line is everywhere, in our homes, in our hospitals and care centers, in our grocery stores and pharmacies, at our truck stops and gas stations.

“And the people who work in these places are our modern day heroes,” he said.

This was the second financial assistance bill proposed by Trudeau’s government since the beginning of the crisis. Its purpose is to “enable Canadians to keep their jobs and get a paycheck,” the prime minister said, adding it is “the largest Canadian economic policy since World War II.” The 75 per cent wage subsidy, which is for three months and retroactive to March 15, is for businesses that have suffered or will suffer a 15 per cent drop in revenues in March or 30 per cent in April and May, finance minister Bill Morneau said.

The Canadian economy lost more than one million jobs last month.

JPMorgan Chase & Co, the country’s largest lender by assets, is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value.

The change highlights how banks are quickly shifting gears to respond to the darkening US economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession. “Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.

Agencies