COVID-19 and the economic recovery in South Asia: Economywide modeling scenarios for Bangladesh and Nepal

We use economywide models to examine the economic recovery from COVID-19 shocks in Bangladesh and Nepal during 2020-2026. Declining labor productivity, capital underutilization, consumption shifts, and international investment shocks had significant and differential sectoral and country-level impacts in these countries. By 2026, GDP will be 6.9% and 13.9% lower in Bangladesh and Nepal, respectively, and the two countries will have an additional 3.3 million people in poverty compared to a no-COVID baseline. Regaining economic and welfare losses will require substantial investments in key industrial, agricultural, and tourism sectors, although tough policy decisions will be required given high levels of public debt.