Abdul Bari Masoud | Clarion India
NEW DELHI — Though the economies of India and Pakistan are in dire straits, United Nations’ annual economic report this week predicted that the South Asian economies are likely to bounce back in the coming years. However, the report, released on Friday here, said the region would continue to face daunting challenges towards sustainable development.
The report underlined that high-quality formal employment continues to be a distant dream for most people in the region.
The report titled United Nations World Economic Situation and Prospects (WESP) 2020, was released by Dr. Nagesh Kumar head of the UN Economic and Social Commission for Asia and the Pacific and Rajiv Chandran. Highlighting the salient features, Dr Kumar said many South Asian economies including the largest economy (India) have been on a slowdown in the recent years.
The report projected that the growth in South Asia would rebound in 2020 but the region would continue to face daunting challenges to carry forward sustainable development. The global economy also suffered its lowest growth in a decade, slipping to 2.3 per cent in 2019. The main reason for the slowdown in economic activity was the prolonged trade disputes. The world, however, could see a slight uptick in growth in 2020 if risks are kept at bay, the report said.
On the growth prospects in South Asia, the report forecast that the region would see economic recovery of the order of 5.1 per cent in 2020, after falling to a decade’s low of 3.3 per cent in 2019, but it will remain well below the rates seen in the recent past.
“The region struggled in 2019 with a combination of external headwinds, notably the global economic slowdown and falling trade, and country-specific domestic challenges. As the effects of one-off shocks wane and governments respond with vigorous fiscal expansion, economic activity will rebound in most of the countries.”
INDIA
On the Indian economic scenario, the report stated: “After experiencing a sharp economic slowdown from 6.8 per cent in 2018 to 5.7 per cent in 2019, India needs to continue structural reforms to bring the country’s growth back to its previous levels.”
“India has committed itself to an ambitious fiscal expansion to complement the country’s already loose monetary policy. The combination of the fiscal stimulus and financial sector reforms, boosting investment and consumption, is expected to support a recovery in growth to 5.8 to 5.9 per cent, but it will take continued structural reforms to bring India’s growth back to its previous levels.”
PAKISTAN
The report on Pakistan stated that the Islamic nation has been struggling with twin deficits and has been forced to tighten its fiscal policy, with a growth of 3.3 per cent in 2019. The economy is expected to recover gradually from 2021 onward, amid the implementation of government reforms.
IRAN
The Islamic Republic of Iran experienced a visibly sharp drop in economic growth, which fell from -2.0 per cent in 2018 to an estimated -7.1 per cent in 2019, owing to a combination of social unrest, flooding, trade sanctions, and increased tensions with Saudi Arabia, the report noted.
The report predicted that Iran’s economy was expected to contract at a milder rate of 2.7 per cent in 2020, but it will likely take several more years for economic growth to return. The country’s lack of economic diversification will continue to weigh on growth, exposing it heavily to external shocks.
RISKS, POLICY CHALLENGES
Dr Kumar also highlighted the risks and policy challenges to South Asia’s economic outlook. He said they were heavily tilted to the downside. “The region remains exposed to external shocks, notably trade shocks and climate change, due to insufficiently climate-resilient infrastructure and a lack of economic diversification in most countries. Structural challenges also include the low quality of employment, with gender barriers to the labour market among the highest in the world.”
According to the UN report, high-quality formal employment continues to be a distant dream for most people in South Asia, hampering the region’s long-term development prospects. As economic growth recovers, policy makers will urgently need to address these structural barriers to development.
GLOBAL GROWTH
On the world economic situation, the UN report said the global growth of 2.5 per cent in 2020 was possible, but it cautioned that a flare-up of trade tensions, financial turmoil or an escalation of geopolitical tensions could derail a recovery. “In a downside scenario, global growth would slow to just 1.8 per cent this year.”
EAST ASIA FASTEST GROWING
According to the Report, despite significant headwinds, East Asia remains the world’s fastest growing region and the largest contributor to global growth. In China, GDP growth is projected to moderate gradually from 6.1 per cent in 2019 to 6.0 per cent in 2020 and 5.9 per cent in 2021, supported by more accommodative monetary and fiscal policies. Growth in other large emerging countries, including Brazil, India, Mexico, the Russian Federation and Turkey, is expected to gain some momentum in 2020.
LIVING STANDARDS
The Report said progress towards higher living standards has stalled for many as Africa has experienced a decade of near-stagnation in per capita GDP and many countries around the world are still ailing from the effects of the commodity price downturn of 2014-16, which resulted in persistent output losses and setbacks in poverty reduction. “In one-third of commodity-dependent developing countries (home to 870 million people), average real incomes are lower today than they were in 2014. This includes several large countries such as Angola, Argentina, Brazil, Nigeria, Saudi Arabia and South Africa.”
RISE IN POVERTY
At the same time, the number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and Western Asia. UN estimates indicate that to eradicate poverty in much of Africa, annual per capita growth of over 8 per cent would be needed, compared to the just 0.5 per cent average rate over the past decade.
The Report highlighted an important point that headline GDP growth misses crucial aspects of sustainability and well-being of the people. “Beyond GDP growth, other measures of well-being paint an even bleaker picture in several parts of the world. The climate crisis, persistently high inequalities, and rising levels of food insecurity and undernourishment continue to affect the quality of life in many societies.” However, the UN Report suggested that the world could see a slight uptick in economic activity in 2020 if risks were kept at bay.
UN Secretary-General António Guterres warned, “These risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”
