The region is already at a standstill as countries try to contain the virus, and the rapid drop in emissions has quickly become visible in satellite images.
While cleaner air is a welcome respite for one of the world’s most polluted regions, this decline also signals the startling halt in economic activity.
The economic outlook for the region is dire
South Asia real GDP growth forecast
According to our latest South Asia Economic Focus, In a worst-case scenario, shown by the dotted red line above, South Asia’s economy could even shrink.
. The immediate response has been rightly focused on mitigating the spread of COVID-19, but it is also important to simultaneously create the conditions needed to revive the economies around the region, once countries emerge from the immediate health crisis.
, as indicated by the green band in the above chart.
Public banks play both a negative and positive role in economic development. On the negative side, these banks suffer from inefficiency and are likely to reduce competition by slowing innovation. They also face severe agency problems, leading to political interventions that can result in an inappropriate use of public money.
These negative characteristics are a root cause of the rise in non-performing assets in recent years. But on the positive side, lending by these banks can be countercyclical. They are also more likely than private banks to provide services to the poor and those living in remote areas.
While the pandemic will exacerbate the weaknesses of public banks, these institutions can also be part of the solution by lending more and reaching out to vulnerable groups.