The World Bank estimated on Sunday that Maldives will be the worst hit country in the economic regression caused in the South Asian region by the global COVID-19 pandemic.
Prior to World Bank's South Asia Economic Focus report, Maldives Monetary Authority (MMA) had estimated that the economic growth of Maldives may hit negative 17 percent in the worst case scenario.
As per the bank's calculations, the collapse of the tourism industry in Maldives will result in gross domestic output contracting by as much as 13 percent, while these numbers stand at 5.9 percent and 2.2 percent for Afghanistan and Pakistan, respectively.
The World Bank predicts that the aforementioned countries are the only three that will see negative growth, although India, Sri Lanka, Nepal, Bhutan and Bangladesh are expected to see sharp falls in economic growth as well.
"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," read the World Bank report.
The report further stated that the growth forecast for the region this year is slashed to 1.8 to 2.8 percent from its pre-pandemic projection of 6.3 percent, with at least half the countries falling into "deep recession".
As per these estimates, South Asia is on course for its worst economic performance in 40 years, and will reinforce inequality in the region, with the pandemic hitting informal workers with limited or no access to healthcare or social safety the hardest.
Governments need 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 said.
The bank called for governments to urgently pursue innovative policies and jump-start economies once the crisis is over.
"Failure to do so can lead to long-term growth disruptions and reverse hard-won progress in reducing poverty," the bank's Vice President Hartwig Schafer said.
Maldives economy is heavily reliant on its tourism sector. As over 70 percent of the country’s GDP is attributed to revenue generated by the tourism industry, Maldives’ economy continues to face severe repercussions due to travel restrictions imposed over the COVID-19 outbreak. It is estimated that the country will face a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency.
In a bid to counteract the financial impact of the COVID-19 pandemic on the local economy, Maldives government introduced an economic relif fund with MVR 2.5 billion intended to prevent the closing down of local businesses and the loss of jobs. The administration has asserted that it will prioritize companies that do not terminate staff members in providing the recovery loans allocated for struggling businesses.
The government also vowed to reduce state spending by MVR 1 billion. In this regard, the government had slashed the salaries of all political appointees and heads of state-owned enterprises (SOEs) by 20 percent. The Parliament followed suit, approving a 20 percent cut on their members’ salaries as well.