World Bank on 6 October 2014 released South Asia Economic Focus report. According to the report, the region’s economy will expand by 6 percent in 2015 and by 6.4 percent in 2016 as compared to 5.4 percent in 2014, potentially making it the second fastest growing region in the world after East Asia and the Pacific.
Highlights of the report
• South Asia’s economy will expand by a real 6 percent in 2015 and by 6.4 percent in 2016 compared to 5.4 percent in 2014. The increase of economy is potentially making it the second fastest growing region in the world after East Asia and the Pacific.
• The outlook for South Asia over the next years indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side.
• But the Future growth will increasingly depend on strong investment and export performance.
• Global recovery remains below expectations and has proven uneven in the across major economies like US and Euro Zone.
• Monetary tightening in an increasingly dynamic US and potential deflation in a weak Euro zone constitute sources of risk for developing and emerging market economies alike. However, bigger effects on the fortunes of the region could come from domestic developments.
• Political turmoil and non-sustainable fiscal policies could undermine stability and investor confidence in South Asia whereas sound macroeconomic policies and economic reforms could spur faster growth.
• Exports in the South Asia region have recently shown a strong export performance which is growing in the double digits in most of the countries.
• Sales abroad were boosted by favorable tailwinds, such as the depreciation of the Indian rupee in 2013; there are also deeper trends at play.
• Export diversification by type of product increased, as did the share of emerging markets in total exports. These are manifestations of an increasingly stronger position of the region in global markets.
• South Asia has an opportunity to become the manufacturing hub of the world since East Asian labour costs increased but achieving this will require boosting competitiveness.
• Other countries in South Asia are Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.
• Pakistan’s economic growth is forecast at 4.4 percent in FY2015 after 4.1 percent in 2014. Recent political turmoil of Pakistan had damaged investor confidence and thereby weakened growth prospects.
• Bangladesh is forecast to grow by 6.2 percent in 2015 and an estimated 6.1 percent in 2014.
• Sri Lanka is expected to continue its strong growth at 8.2 percent in 2015 rising from 7.8 percent in 2014.
• Afghanistan is on a more fragile path, dominated by security and political concerns, after having grown by a modest 1.5 percent in 2013.
• The report claims that the Indian economy will comprise 80 percent of the region’s output, which is set to grow by 6.4 percent in fiscal year (FY) 2015-16 after 5.6 percent in FY 2014-15.
• According to report, India is benefiting from a Modi dividend as the economic activity kept floating by expectations from the newly elected government of Prime Minister Narendra Modi.
• Recovery of US economy will provide a market for Indian merchandise and service exports. Private investment is expected to pick up, and declining oil prices should boost private sector competitiveness.
• But economic reforms will be needed for India to achieve its full long-term growth potential.
What: Released by World Bank
When: 6 October 2014