The COVID-19 pandemic is giving rise to "an unprecedented global shock, which could bring growth to a halt and could increase poverty across the region," the World Bank warned on Monday, March 30, as the world fights the virus.
"The pandemic's economic fallout could result in China's growth to come to a standstill and drive 11 million more people in East Asia into poverty," World Bank Chief Economist for East Asia and the Pacific, Aaditya Mattoo, said.
Even if the situation improves, the region will witness a sharp fall in growth, with China's expansion lowering to 2.3 percent from 6.1 percent in 2019, the report said.
As two-fifths of the world's population is under lockdown affecting businesses and bringing a slowdown in transportation, the epicenter of the outbreak may skip a recession but will witness a massive slowdown.
Economists at the World Bank recently projected China's economy to grow by 5.9 percent this year, marking its worst ever performance since 1990.
The East Asia and Pacific region, excluding China, could experience a slowed growth to 1.3 percent in the baseline or fall to 2.8 percent as compared to 5.8 percent last year, World Bank said.
"The pandemic is profoundly affecting the region's economies, but the depth and duration of the shock are unusually uncertain," the report mentioned, pointing that the region was disturbed by trade conflict with the United States.
"Containment of the pandemic would allow recovery, but the risk of durable financial stress is high even beyond 2020," the World Bank warned. "Most vulnerable are countries that rely heavily on trade, tourism, and commodities; that are heavily indebted; and that rely on volatile financial flows."
Raising concerns over poverty, the World Bank said that a sharp slowdown followed by a massive recovery will help 24 million fewer people in the region escape poverty.
However, it will push an additional 11 million people into poverty where there is a severe economic contraction after a sluggish recovery.
About 17 economies in the region crucial to global value chains and constitute 70 percent of global trade "have all been affected," recording high numbers of COVID-19 cases.
"In this interdependent world where our economic destinies are intertwined, there's going to be mutual amplification, because the shock is simultaneously affecting all these important countries," the report noted. "That makes it particularly costly in economic terms."
The World Bank urged for strong action, with the priority on containment and also on means to mitigate the shock to households of lost wages.
"It is not too late to follow Korea's example to ramp up testing and containment so that economies can begin to return to normal more quickly. This is not rocket science. With help even poorer countries can do it," the chief economist said.
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