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The outlook for growth in South Asia in five charts: Robust prospects

Temel Taskin's picture
South Asia’s growth prospects appear robust, with household consumption expected to remain strong, exports expected to recover, and investment projected to revive with the support of policy reforms and infrastructure improvements.

Growth to pick up in region

Growth in the region was an estimated 6.5 percent in 2017. It is forecast to pick up to 6.9 percent in 2018 and stabilize around 7 percent over the medium term. The forecast assumes strengthening external demand as the recovery firms in advanced economies, and supportive global financing conditions. Monetary policy is expected to remain accommodative as modest fiscal consolidation proceeds in some countries.

Growth
Sources: Haver Analytics, World Bank.
Note: Shaded area indicates forecasts.


Inflation rates remain below historical averages
 
Inflation rates in the region remain broadly below historical averages while progress in fiscal consolidation has been mixed across economies.

Inflation

Sources: Haver Analytics, World Bank.
Note: Last observation is November 2017 for India and Pakistan, and October 2017 for Bangladesh and Sri Lanka. Due to lack of data, average for Bangladesh is 2009-17 and average for Sri Lanka is 2015-17.
 
Non-performing loans remain high

Non-performing loans remain high in South Asia despite some progress.

Non-performing loans
Sources: Haver Analytics, World Bank.
Note: Last observation is 2015 for Bhutan and Bangladesh, and 2016 for the others.

Potential growth has slowed, but is expected to stabilize

Regional potential growth has slowed from around 7.2 percent prior to global financial crisis to an average of 6.8 percent in recent years, reflecting a slowdown in capital accumulation. Over the medium term, South Asia’s potential growth is expected to stabilize at around 6.7 percent.

Potential growth
Notes: Lines and bars denote averages of different periods.
Based on the production function approach for India and Sri Lanka.


Labor, education, health reforms, investment, could boost potential

Labor market, education, and health reforms, along with investment, could boost the region’s potential growth by as much as 0.4 percentage points a year. Promoting greater integration of the region into global and regional value chains could also provide a nudge.

Potential growth under reform scenarios
Source: World Bank estimates.
Notes: GDP weighted averages. Derived using the production function approach for India and Sri Lanka. Details and policy scenarios are described in January 2018 Global Economic Prospects.

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