The Economist Intelligence Unit (The EIU) says that it expects countries to provide fiscal and monetary stimulus, (due to the negative impact to economies from coronavirus) although the scope of such measures will vary.
India and Bangladesh, given their stronger economic positions, will be able to provide relatively more; meanwhile, measures in Pakistan and Sri Lanka will be more limited.
Central banks and governments have responded by providing stimulus in the face of the economic costs of the pandemic. However, we believe the measures will not come close to offsetting the loss of economic activity. The Indian, Pakistani, Bangladeshi and Sri Lankan central banks have cut their policy rates and announced other measures to ensure liquidity in the financial sector, while the Indian, Pakistani and Bangladeshi governments have announced fiscal stimulus plans, primarily to support low-income households.
The EIU also anticipates to struggle as the number of cases rises in the coming weeks. Chronic underinvestment in healthcare infrastructure and a low number of doctors and hospital beds in relation to the population mean that health systems will not be able to cope with the further toll, exacerbating the spread of the virus and the death rate.
The coronavirus pandemic will dampen economic growth substantially. Preventive measures taken by governments to curtail the movement of people will lead to a demand-side shock to private consumption—the primary driver of economic growth in many South Asian economies.
The closure of factories and businesses will result in a supply-side shock, and the subsequent lay‑offs will exacerbate the demand shock.
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