Acknowledgements

Acknowledgements

This report is a joint product of the Office of the Chief Economist for the South Asia Region (SARCE) and the Macroeconomics, Trade and Investment (MTI) Global Practice. Its preparation was led by Valerie Mercer-Blackman (Senior Economist, SARCE), with Maurizio Bussolo (Lead Economist, SARCE) and Jean Nahrae Lee (Senior Economist, SARCE) responsible for Chapter 3. The report was prepared under the oversight of Hans Timmer (Chief Economist, South Asia Region), in close collaboration with Manuela Francisco (Practice Manager, MTI) and Zoubida Kherous Allaoua (EFI South Asia Regional Director).

The core team for Chapter 1 and 2 consisted of Valerie Mercer-Blackman, Lazar Milivojevic, Sebastian Franco-Bedoya and Yi(Claire) Li. Chapter 1 benefitted from substantial contributions by Michael Norton, Nayantara Sarma wrote Box 1.3, and Rana Damayo AlGazzaz provided inputs to Box 1.4 (all SARCE). Benoit Campagne (MTI) contributed to the macroeconomic modelling for Chapter 2; Koen Martijn Geven and Amer Hasan (both HSAED) contributed Box 2.4. The core team of Chapter 3 consisted of Maurizio Bussolo, Jean Nahrae Lee, Carlos Alberto Lara Oliveros, Prema Sai Narasimhan, Nayantara Sarma (all SARCE) and Chris Andersen, Kathryn Gilman Andrews, Jewelwayne Salcedo Cain, Ajay Tandon (all HSAHN), Damien de Walque (DEC), and Anup Malani and Satej Soman (both from University of Chicago). In Chapter 3, a box was contributed by Damien de Walque and Nayantara Sarma on the vaccine’s demand side issue. Colleagues from MTI providing information for the country briefs in Chapter 4 include Sayed Murtaza Muzaffari, Tobias Akhtar Haque (Afghanistan); Melanie Simone Trost (Bhutan); Bernard Haven, Nazmus Sadat Khan (Bangladesh); Pui Shen Yoong (Maldives); Kene Ezemenari, Nayan Krishna Joshi, Florian Blum (Nepal); Aurélien Kruse, Rangeet Ghosh, Dhruv Sharma and Rishabh Choudhary (India); Adnan Ashraf Ghumman, Derek Hung Chiat Chen, Zehra Aslam (Pakistan); Fernando Gabriel Im and Kishan Abeygunawardana (Sri Lanka).

Chapters 1 and 2 greatly benefitted from inputs provided by Virgilio Galdo (LCRCE), Andrew Dabalen, Nandini Krishnan and Laura Liliana Moreno Herrera on

SOUTH ASIA VACCINATES

poverty and employment (all ESAPV). Robert Beyer (MTI) and Arti Grover (ETIFE). Chapter 3 greatly benefitted from comments and questions from participants in the 7th South Asia Economic Policy Network Conference on “Vaccinating South Asia”, as well as from Feng Zhao (HHNGE), who provided insightful comments and feedback.

Useful comments and suggestions were also provided by Faris Hadad-Zervos (Country Director for Nepal, Sri Lanka and the Maldives), Rene Antonio Leon Solano, Hideki Higashi, and Gyorgy Bela Fritsche (Health, Nutrition and Population), Janet Minatelli (SARRE), Franz Ulrich Ruch (EPGDR), and Cecile Fruman (Engagement), by numerous colleagues from the Office of the Chief Economist for the South Asia Region, the Macroeconomics, Trade and Investment Global Practice.

Alejandro Espinosa at Sonideas was responsible for the layout, typesetting, and an accompanying video. Carlos Reyes designed the graphics and layout. William Shaw provided economic editing. Barbara Yuill copyedited the chapters. Elena Karaban (Manager, SAR External Affairs), Yann Doignon (External Affairs Officer), Rana Damayo AlGazzaz, and Adnan Javaid Siddiqi (both Consultants) coordinated the dissemination. Neelam Chowdhry provided valuable administrative support.

South Asia as used in this report includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The cutoff date for this report was March 25, 2021.

South Asia Chief Economist Office Macroeconomics, Trade, and Investment Global Practice

Contents

contents

Acknowledgements Executive Summary 3

7

An incomplete recovery 1.1 Signs of a recovery 1.2 GDP estimates and high-frequency economic indicators suggest economic recovery 13

13

21 1.3 Did remittances in South Asia really increase? 33 1.4 Inflation, cautiously proactive monetary policy, and subdued fiscal policy 42 1.5. The crisis has brought to light the disparate effects of the pandemic for different segments of the population 49 Appendix 1 68 References 70 Precarious outlook 75 2.1 The outlook for the region has improved 76 A negative external shock: sudden stop scenario 87 2.2: How is this crisis different than the Global Financial Crisis? 89 2.3. Government spending multiplier is significant and larger under higher uncertainty 100 2.4. Steering the transition in 2022 and beyond 104 Appendix 2 112 References 114 South Asia Vaccinates 121 3.1 Vaccines save lives and livelihoods. 121 3.2 Vaccines are cost-effective 127 3.3 Disease eradication is a public good, while vaccines to achieve eradication have private good characteristics 129 3.4 South Asia has limited fiscal space to finance the vaccination program 131 3.5 South Asia rollout of the vaccine has started well, but its health systems may face capacity constraints in reaching the full population 135

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3.6 Equitable distribution of vaccines – allocation rules 145 3.7 Equitable distribution of vaccines, inequality in South Asian health systems 149 3.8 Lessons for the future 154 Appendix 3: Data requirements for modeling exercise 155 References 157 South Asia country briefs 161 Afghanistan 162 Bangladesh 167 Bhutan 172 India 177 Maldives 182 Nepal 187 Pakistan 192 Sri Lanka 197