World Bank on 13 April 2015 released South Asia Economic Focus report. The report has projected the economic growth of South Asia for the year 2016 and 2017.
As per the report, economic growth of the region will increase from 7 percent in 2015 to 7.6 percent by 2017. This increase in the forecast of growth rate has been possible primarily due to decline in oil prices and it could be achieved by maintaining strong consumption and increasing investment.
The region is among the greatest global beneficiaries from cheap oil, as all countries in it are net oil importers. In the Quarter 4 (Q4) of 2014 South Asia was already the fastest-growing region in the world.
Projection for India
The report projected a GDP growth rate of 8 per cent for India by 2017. In India, GDP growth is expected to accelerate to 7.5 per cent in fiscal year 2015-16. It could reach 8 per cent in FY 2017-18, on the back of significant acceleration of investment growth to 12 per cent during FY 2016 to FY 2018.
The report highlighted that India has already taken encouraging steps to decouple international oil prices from fiscal deficits and to introduce carbon taxation to address the negative externalities from the use of fossil fuels. The challenge will be to stay the course in the event of oil price hikes – something that may well happen in the medium term.
Region Wise Projection
Report highlighted that Afghanistan can increase the GDP growth rate from 2.5 percent in 2015 to 5.0 percent in 2016. For achieving this growth, Afghanistan should pave a way towards successful political transition which needs to be supplemented by a stable security environment as well as by adequate management of the current fiscal crisis. Agriculture and services are likely to be the key drivers of growth in the immediate future.
Growth in 2015 is now projected at 5.6 percent. However, a recovery driven by strong domestic demand is possible. It will require a continuation of single-digit inflation, an improved investment climate, and above all political stability.
Economic activity in Bhutan is expected to gain momentum with real GDP growing at 6.7 percent in 2015, driven by new hydropower construction and innovative tourism measures such as Visit Bhutan 2015.
The GDP growth will remain in the 4.5 to 5 percent range. The fact that consumption remains the country’s main growth driver leaves it vulnerable to a slowdown in remittance growth. To improve its growth performance the country needs to boost infrastructure development to support private sector investment.
In Pakistan a gradual recovery to around 4.6 percent growth by 2016 is aided by low inflation, and fiscal consolidation. Further progress depends on tackling key growth constraints including frequent power cuts, a cumbersome business environment, and low tax revenue.
GDP growth is expected to decline to 6.9 percent in 2015 due to slowing construction activity. This trend is partially set off by consumption growth thanks to increased public sector wages and higher disposable income. With competitiveness remaining a challenge, the new government is reassessing the previous investment-led growth model.