‘Governments of countries where vaccines are being produced – the USA, European Union members, the UK, India, Russia, and China – need to cooperate under United Nations leadership to ensure that a sufficient supply of COVID-19 vaccine doses reaches the poorest countries.’ – Excerpt from a Project Syndicate (PS) published article ‘Vaccine producers must step up’ by Jeffrey D. Sachs
The Asian Development Bank (ADB) recently released its flagship report ‘Asian Development Outlook’ (ADO) update, which highlighted that vaccine inequality, among other factors like rising global commodity prices, was producing varied economic recoveries among countries. ADB President Masatsugu Asakawa, in his foreword to the Report, pointed out in this regard: ‘The growth trajectories of developing Asia’s economies are heading in different directions. Stronger growth is expected in economies that are coping well with the covid-19 pandemic, as they can take advantage of the strengthening recovery in global demand. But those that are struggling with the pandemic cannot, and are falling behind.’
Moreover, he pointed out that differentiated vaccine rollout performance, among other factors, was leading to varied growth experience in Asia, whereby ‘Growth forecasts are revised up for East Asia and Central Asia, but down for South Asia, Southeast Asia, and the Pacific from the projections made in April. This reflects not just the differences in vaccine progress and control of domestic outbreaks but also other factors, including rising commodity prices which are helping Central Asia, and depressed tourism which continues to weigh on tourism-dependent economies in the Pacific and elsewhere.’
In the particular case of Pakistan, unlike what the government expected around the time of passing Budget a couple of months back, and which it may find itself a lot more challenging in the wake of factors like rising imported inflationary component and a lot-less-than-needed financial support by development partners to bring greater stimulus and macroeconomic stability at the same time, the Report’s September update expected to be at 3.9 percent for 2021, and 4 percent next year.
This is because, developing countries, including Pakistan, have little room left in terms of practicing macroeconomic policy instruments, especially since a regime of global vaccine apartheid has meant developing countries are a lot far behind on inoculation, and in turn economic recovery, than rich, advanced countries, and this prolonged time frame of enduring the rather starker end of the pandemic in terms of consequences has left the country left with little balancing act between stability and growth through employing monetary and fiscal policies, and the innovativeness that can be brought in their usage
The government, on the other hand, expected much higher growth numbers, which given the situation prevailing since passing of Budget, where stagflationary headwinds are gaining pace overall globally, but especially in developing countries, due to reasons including facing high level of vaccine inequality and relatively little stimulus being provided than in rich, advanced countries, all means that it continues to face much more difficult task of meeting those more optimistic growth numbers than being envisaged in ADO.
As per the Report’s September 2022 growth forecasts for South Asia, only Bhutan and Sri Lanka have lower growth forecasts than Pakistan. This forecasted growth rate for Pakistan for September 2022, is the lowest for ‘Developing Asia’ (DA) average overall and in terms of its component geographic groups – where the Report defines ‘Developing Asia comprises the 46 members of the Asian Development Bank listed below by geographic group’. Hence, the average forecast economic growth rate for DA for September 2022 was 5.4 percent, for East Asia at 5.1 percent, for South Asia at 7 percent, for Southeast Asia at 5 percent, and the Pacific at 4.8 percent.
At the same time, Pakistan’s forecasted inflation for September 2022 by the Report, is the highest in South Asia at 7.5 percent, which is also much higher than DA average at 2.7 percent, and even in terms of the ‘geographic group’ it is the highest, whereby for Central Asia it is 6.7 percent, East Asia (2.2 percent), South Asia (5.1 percent), Southeast Asia (2.4 percent), and the Pacific (4.1 percent). Clearly, stagflationary consequences during the pandemic are among the highest for Pakistan in South Asia.
Having said that, while Pakistan faces an immense up-hill task in building upon the macroeconomic stability achieved over the last few years, and to continue to provide needed fiscal stimulus, and in particular make public health sector expenditures during the pandemic, and to also mitigate the otherwise high imported inflationary impact of high level of international commodity prices, especially of food and oil, since Pakistan is a net importer of oil and also imports a significant quantity of food items, it is important that international development partners, especially the International Monetary Fund (IMF) with which Pakistan is currently in a programme, understands the importance of providing greater and much needed quantity of financial assistance.
This is because, developing countries, including Pakistan, have little room left in terms of practicing macroeconomic policy instruments, especially since a regime of global vaccine apartheid has meant developing countries are a lot far behind on inoculation, and in turn economic recovery, than rich, advanced countries, and this prolonged time frame of enduring the rather starker end of the pandemic in terms of consequences has left the country left with little balancing act between stability and growth through employing monetary and fiscal policies, and the innovativeness that can be brought in their usage.
Moreover, a recently published, Financial Times (FT) article ‘Low vaccination rates blamed for ‘diverging’ south-east Asia growth’ pointed out ‘South-east Asian countries that failed to administer Covid-19 vaccines fast enough and are suffering outbreaks of the disease are causing a growing regional economic divergence, the Asian Development Bank said on Wednesday. The ADB cut its 2021 growth forecasts for leading economies including Thailand, Indonesia, the Philippines and Vietnam even as it raised its forecasts for China, Taiwan and South Korea. “Regional growth paths are diverging,” the Japanese-backed multilateral bank said as it published a six-monthly update to its Asian Development Outlook for 2021. “Economies that have successfully contained the pandemic and actively rolled out vaccines are benefiting more than others from the recovery in global demand.”’
