The economy of the South Asian region—comprising Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka—will become the second fastest growing region in the world after East Asia and the Pacific, the World Bank has said.
The South Asian economy will expand by a real six percent in 2015 and by 6.4 percent in 2016 compared to 5.4 percent in 2014, says the World Bank in its twice-a-year ‘South Asia Economic Focus’ report.
Martin Rama, Chief Economist for South Asia at the World Bank, said, “The outlook over the next years for South Asia indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side.”
“Future growth will increasingly depend on strong investment and export performance,” he added.
According to the report, the Indian economy, which makes up about 80 percent of the South Asian region’s output, is set to grow by 6.4 percent in fiscal year (FY) 2015/16 after 5.6 percent in FY2014/15.
Reviewing the risks facing South Asia’s economies, the report says, “Political turmoil and non-sustainable fiscal policies could undermine stability and investor confidence, whereas sound macroeconomic policies and economic reforms could spur faster growth.”
Exports have recently shown a strong export performance in many South Asian countries, the report said, growing in the double digits in several of them. The depreciation of the Indian rupee in 2013, increase in export diversification by type of product, and an increase in the share of emerging markets in total exports indicate an increasingly stronger position of the South Asian region in global exports.
The rising labour costs in East Asia provide an opportunity for South Asia to become the manufacturing hub of the world; but achieving this will require boosting competitiveness.
On Indian economy, the report says, it is benefiting from a “Modi dividend”, and private investment is expected to pick up. The declining oil prices should boost private sector competitiveness. But economic reforms will be needed for India to achieve its full long-term growth potential, the report argues.
Pakistan, the region’s second biggest economy, is forecast to grow at 4.4 percent in FY2015 after 4.1 percent this year. Bangladesh’s economy is forecast to grow by 6.2 percent in FY2014/15 and an estimated 6.1 percent the past fiscal year. Sri Lanka is expected to continue its strong growth, at 8.2 percent in 2015 rising from 7.8 percent this year, according to the report. (RKS)
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