As the new coronavirus spreads, tragic human consequences at various levels are rapidly unfolding. At the time of writing this article, there is no signs that the spread of the virus is abating; it is rather mounting and taking more lives at an escalating rate. Along with human costs, its effects are penetrating deeper into the global economy. The virus has caused widespread economic disruptions leading to severe contraction in economic activity in all regions of the world. According to the UN trade and development agency UNCTAD, the slowdown in the global economy caused by the coronavirus outbreak is likely to cost US$1.0 trillion in 2020.

Immediate concerns are public health or related life safety issues.

The global economy is facing a double whammy in an unprecedented magnitude – the danger to public health due to the pandemic, and a growing risk of global economic recession. It is now commonly thought that COVID-19's blow to the global economy has been stronger and sharper than the global financial crisis of 2008, and even the Great Depression in the 1930s. To be precise, each part of aggregate demand – consumption, investment, and exports – is badly affected in most of the countries. Also, domestic, regional and global supply chains are severely disrupted, which may take a long time to get back to the normal state.

Countries from South Asia are no exception and started going through the situation. This dual economic crisis at the global level can lead to a widespread national setback in most of the countries in the densely populated region. Most of the countries of this region are highly vulnerable to the COVID-19 outbreak and may have large humanitarian and economic effects if the situation goes out of control. More specifically, prolonged shutdown – as it is happening in most of these countries, as well as a possible global slowdown, would strike all of the region's economies very hard. Major sectors in the economy, both the export and domestic market-oriented, are affected. Also, marginalized people and near-to-marginalized people may fall into further deprivation. Even some other sections of people in society may become highly vulnerable. While national governments in South Asia are in the process of undertaking different policy measures in the wake of this crisis, the situation, however, might and should act as a wake-up call for regional leaders to look beyond narrow national and geopolitical interests.

World Health Organisation (WHO) in early March warned leaders of the densely populated region of taking enough precautionary measures as the sub-continent accommodating one-fourth of the world population is highly vulnerable to the new coronavirus. Soon after the alert, things started deteriorating and it continues. 

East Asian countries experiences could be effective

Although the pandemic has been causing severe public health and economic disruptions all over the world, there are very few countries that already showed some sorts of success in the battle against the highly catching virus. Look at China, from where the virus spreads, Singapore, South Korea and Japan. We need to know how they became successful. What were their strategies or priorities? We should arrange regular discussion with policymakers and medical staffs of these countries so that we can also replicate these to stem the pandemic from spreading. The good sign is the South Asian countries started communicating with their Chinese, Japanese and Singaporean counterparts to this effect. In response, China already sent a large volume of COVID-19 testing kits and other necessary medical supplies to fight against the deadly virus. For example, China has so far donated Bangladesh 45,500 COVID-19 testing kits, 400,000 masks, 15,000 personal protective equipment (PPE), 1,000 infrared thermometers, 100 kilogram disinfectant and 50 kilogram hand sanitizers till the date. Bangladesh government like some others in the region continues discussion to receive a team of Chinese medical experts to train up its local healthcare professionals to fight out the virus.

What World Bank's regional growth projection says?

World Bank in its twice-a-year-regional update called South Asia Economic Focus predicted a sharp economic slump in each of the region's eight countries in the form of halting economic activity, collapsing trade and the greater stress in the financial and banking sectors by the COVID-19 pandemic.

In this fast-changing and uncertain context, the report presents a range forecast, estimating that regional growth will fall to a range between 1.8 and 2.8 percent in 2020, down from 6.3 percent projected six months ago. That would be the region’s worst performance in the last 40 years, with temporary contractions in all South Asian countries.

In case of prolonged and broad national lockdowns, the report warns of a worst-case scenario in which the entire region would experience a negative growth rate this year. This deteriorated forecast will linger in 2021, with growth projected to hover between 3.1 and 4.0 percent, down from the previous 6.7 percent estimate. The impact of the pandemic will hit hard low-income people, especially informal workers in the hospitality, retail trade, and transport sectors who have limited or no access to healthcare or social safety nets. The report notes that the COVID-19 shock will likely reinforce inequality in South Asia. While there are no signs yet of widespread food shortages, the report warns that a protracted COVID-19 crisis may threaten food security, especially for the most vulnerable.

Regional cooperation or coordinated action plan required

To avert this crisis, countries in South Asia must respond quickly and have concerted efforts. These countries also need to cooperate with international organizations and key global actors to ensure an effective and sustainable strategy. What kind of actions are needed at the national level? The monetary policy should include lowering interest rates and credit easing. Countries should ease credit to help households smooth their consumption and help firms survive the immediate shock of the outbreak. The fiscal policy should deploy fiscal stimulus, including direct cash disbursements to households and affected firms. Given the size of the economic shock, fiscal deficits in these economies may need to be increased from the levels in usual years. How can the regional response in South Asia help? In South Asia, despite significant potentials, regional integration and cooperation processes have been low. Historically, there is a serious lack of mutual trust among most of the nations. However, a common crisis, like the one brought by COVID-19, can bring these countries together.

A promising sign of potential regional cooperation finally occurred on March 15, 2020 when Indian Prime Minister Narendra Modi organized a videoconference about the coronavirus pandemic with the eight-member countries of the only intergovernmental group spanning the entire region, the South Asia Association for Regional Cooperation (SAARC).

This was SAARC’s first high-level meeting since 2014. Although it was not an official summit, leaders of seven countries and Pakistan was represented by its health minister. At the meeting, India’s prime minister launched s COVID-19 emergency fund with an initial contribution of $10 million. The fund has since collected voluntary contributions of more than $8 million from most SAARC members.

I think, countries should explore greater regional collaboration and new cross-border public-private partnerships to expand the production and delivery of essential medical supplies and services, and collaborative medical research. Eventually, a South Asian monitoring centre on COVID-19 can be set up. At the same time, South Asian countries need to share their experiences of the national policy measures to combat the crisis. The SAARCFINANCE Forum, which was established in 1998 as a regional network of the SAARC Central Bank Governors and Finance Secretaries, needs to be reactivated. Though the primary function of the network is to conduct a dialogue on macro-economic policies of the region and share experiences and ideas of the member countries, the forum has been suspended since 2014 with the deadlock in the SAARC process. As the Prime Minister of India, in a video-conference with SAARC leaders on 15 March 2020, proposed an emergency COVID-19 fund for SAARC countries, this is the high time now to revitalize the SAARCFINANCE Forum on how this emergency fund can be created, expanded and used. Lastly, given that the global supply chain is broken for a large number of sectors, South Asian countries should explore the use of regional supply chain as much as possible.

Conclusion

The current crisis sends a strong message that a heavy reliance on a few countries, both in the cases of exports and imports, is counterproductive. Despite the huge potential of intra-regional trade, South Asian countries have not been able to exploit this potential for a number of reasons which include unfavourable economic and trade policies, underdeveloped regional trade logistics, and political conflicts. The current situation underscores the need for a much greater regional integration in South Asia by addressing the aforementioned unfavourable factors with a positive mindset. Finally, the SAARC process needs to be rejuvenated. The crisis brought by COVID-19 stresses the importance of deeper regional cooperation in South Asia. Countries in this region need to comprehend this need and make extra-ordinary efforts to put aside their differences which forbid such cooperation.