The World Bank predicted on Tuesday that South Asia will grow by 5.8% this year, making it the fastest-growing area in the globe, even though the rate is still lower than it was before the pandemic.
As post-pandemic recoveries fade and decreased global demand impacts economic activity, the latest South Asia Development Update from the World Bank predicts that growth in the region will slow slightly to 5.6% in 2024 and 2025.
Franziska Ohnsorge, the organization’s top economist for South Asia, said that the region’s growth is outpacing that of all other emerging markets this year, coming in at about 6%.
The World Bank stated in its report that South Asia “seems to be forging ahead,” despite the fact that many emerging countries have been slowed down by rising inflation and interest rates.
Nevertheless, according to Ohnsorge, “for all of the countries here, this represents a slowdown from pre-pandemic levels,” and the growth wasn’t quick enough to achieve all of the regional nations’ development objectives.
The report stated that despite the gains, the area still has a long way to go. Around $2,000 per person, or one-fifth of what is earned in East Asia and the Pacific, is the per capita income in South Asia. Although high, the current growth rates are insufficient for South Asian countries to become high-income within a generation, it was claimed. Furthermore, the growth isn’t always equal.
With 6.3% growth projected for India, the country with the largest share of the regional economy, other countries like the Maldives and Nepal are also anticipated to develop as a result of a pickup in tourism.
But in other nations, the situation is worse. According to the World Bank, Pakistan’s projected growth of 1.7% is less than the country’s population growth rate, while Bangladesh’s projected growth of 5.6% may decelerate. Although Sri Lanka’s economy, which collapsed last year, is slowly emerging from a deep recession, the IMF this week decided against providing a second tranche of funds because it felt that the country had not made enough progress with its economic reforms.
The average government debt in South Asian nations, according to the World Bank, will be 86% of GDP in 2022, greater than that of other rising economies. It further stated that a heavy debt load might boost borrowing costs and elevate the danger of default.
The slowdown in China’s economy may also have an impact on the region’s economic prospects, and the report noted that the area is also susceptible to further shocks from natural catastrophes, which are becoming more frequent and severe as a result of climate change.
Ohnsorge claimed that by taking advantage of energy transition prospects, which might increase employment, decrease reliance on energy imports, and lower pollution levels, governments in South Asia could improve fiscal situations.
The World Bank stated that “almost one-tenth of the region’s workers are employed in pollution-intensive jobs,” many of which are concentrated among undocumented and lower-skilled individuals who are more susceptible to shifts in the labor market. Ohnsorge stated that the area is now falling behind neighboring regions in adopting energy-efficient technologies and generating more green jobs.
The latest India Development Update, which the World Bank also released on Tuesday, revealed that, despite a difficult global economic climate, India had one of the highest rates of growth among developed nations’ economy in the previous fiscal year, at 7.2%. It was over twice the average for emerging market economies, placing it second among the Group of 20 countries, according to the report.
Overall economic development is projected to decelerate in the medium term due to the expected continuation of global issues brought on by high interest rates, geopolitical unrest, and weak global demand. The World Bank expects India’s GDP to rise by 6.3% in the current fiscal year, blaming largely external causes and dwindling pent-up demand following the COVID-19 pandemic.
