0244 GMT August 07, 2020
The bank's Latin America and Caribbean branch projected that gross domestic product for the region will fall by 4.6 percent before rebounding by 2.6 percent next year. Venezuela, which has already seen a dire economic plunge, was not included in the prediction, ctvnews.ca reported.
That's even more dramatic than the contraction of 1.8 percent to four percent projected earlier this month by the UN's Economic Commission for Latin America and the Caribbean.
The disease has slammed tourism, demand for the region's products and crucial remittances sent home by migrants in the US and elsewhere.
The bank said governments will need to rapidly ramp up existing social assistance programs while also supporting financial sector institutions and key sources of employment.
“To support jobs and firms, governments may need to take ownership stakes in strategically important firms. To avert a financial crisis, they may need to recapitalize banks and absorb non-performing assets.”
Humberto Lopez, the bank's acting vice-president for the region, said, “We need to help people face these enormous challenges and make sure that financial markets and employers can weather the storm. That means limiting the damage and laying the groundwork for recovery as fast as possible.”
The bank warned that aid for businesses must be seen as ‘transparent and professional’ to maintain confidence and avoid the appearance of corruption. “This may also allow decision makers to take urgently needed measures without fearing prosecution in the future,” it said.
During the Great Recession that began in 2008, the United States took stakes in companies including General Motors through the Troubled Asset Relief Program.
Many Latin American governments already were facing economic problems when the crisis hit and have little room to maneuver without running into debt problems. That will complicate efforts to help their citizens.
“The hardship from the crisis will be enormous for large segments of the population,” the bank noted. “Many households live from hand to mouth and they do not have the resources to cope with the lockdowns and quarantines needed to contain the spread of the epidemic.”
The World Bank stated that South Asia faces its worst economic performance in 40 years because of the coronavirus. The effects will unravel decades of progress in the region's battle against poverty.
Economies such as India, Bangladesh, Sri Lanka, and Pakistan have reported relatively few virus cases but experts fear they could be the next hotspots, BBC reported.
The South Asia region is home to 1.8 billion people and some of the world’s most densely populated cities.
"South Asia finds itself in a perfect storm of adverse effects. Tourism has dried up, supply chains have been disrupted, demand for garments has collapsed and consumer and investor sentiments have deteriorated," said the World Bank report.
It has slashed its growth forecast for the region this year to 1.8 percent to 2.8 percent from its original projection of 6.3 percent made before the virus outbreak. At least half the countries in this region could fall into ‘deep recession’.
The worst hit economy will be the Maldives, a nation of small islands in the Arabian Sea where the collapse of high-end tourism could see its economic output shrink by as much as 13 percent, warned the World Bank.
India, the biggest economy in South Asia, could see growth of just 1.5 percent in its financial year, down from a figure of around five percent, the World Bank predicted.
It has advised governments to "ramp up action to curb the health emergency, protect their people, especially the poorest and most vulnerable, and set the stage now for fast economic recovery".
The World Bank also recommended temporary work programs for migrant workers, debt relief for businesses and individuals while cutting red tape on essential imports and exports.
Last week the Washington, D.C.-based lender said it would deploy up to $160 billion (£128 billion) in financial support over the next 15 months to help vulnerable countries deal with the pandemic and bolster their economic recovery.