Michelle ThompsonDespite the pace remaining below pre-pandemic levels, South Asia is predicted to grow by 5.8% this year, making it the fastest-growing area in the globe, the globe Bank said on Tuesday.
The World Bank’s most recent South Asia Development Update predicted that as post-pandemic recoveries fade and decreased global demand impacts on economic activity, growth in the region will slightly slow to 5.6% in 2024 and 2025.
According to Franziska Ohnsorge, the organization’s senior economist for South Asia, the region is growing at a rate of about 6% this year, outpacing all other emerging economies.
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 ways 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.
According to the World Bank, “almost one-tenth of the region’s workers are employed in pollution-intensive jobs,” many of which are concentrated among undocumented and less-skilled individuals who are more susceptible to changes in the labor market. According to Ohnsorge, the area now lags behind others in adopting energy-efficient technologies and producing more green jobs.
On Tuesday, the World Bank also published its most recent India Development Update, which 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%. According to the report, this made it the second-highest among the Group of 20 nations and was nearly double the average for developing market economies.
The medium-term outlook for global difficulties, including high interest rates, geopolitical unrest, and weak global demand, indicates a slowing of overall economic growth. India’s GDP growth is expected to be 6.3% in the current fiscal year, according to the World Bank, which mostly attributes it to external causes and dwindling pent-up demand following the COVID-19 pandemic.
