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South Asia: A bright spot in darkening economic skies?

Hartwig Schafer's picture
South Asia is set to remain relatively insulated from some of the rising uncertainties that are looming large on the global economic horizon. The region will retain its top spot as the world’s fastest-growing region. The Siddhirganj Power Project in Bangladesh. Credit: Ismail Ferdous/World Bank

If, like me, you’re a firm believer in New Year’s resolutions, early January ushers in the prospect of renewed energy and exciting opportunities. And as tradition has it, it’s also a time to enter the prediction game.
 
Sadly, when it comes to the global economy, this year’s outlook is taking a somber turn.
 
In the aptly titled Darkening Skies, the World Bank’s new edition of its twice-a-year Global Economic Prospects report shows that risks are looming large on the economic horizon.
 
To sum up:  In emerging market and developing economies, the lingering effects of recent financial market stress on several large economies, a further deceleration in commodity exporters are likely to stall growth at a weaker-than-expected 4.2 percent this year.
 
On a positive note, South Asia is set to remain relatively insulated from some of these rising global uncertainties and will retain its top spot as the world’s fastest-growing region.
 
Bucking the global decelerating trend, growth in South Asia is expected to accelerate to 7.1 percent in 2019 from 6.9 percent in the year just ended, bolstered in part by stronger investments and robust consumption.  

Among the region’s largest economies, India is forecast to grow at 7.5 percent in fiscal year 2019-20 while Bangladesh is expected to moderate to 7 percent in fiscal year 2018-19. Sri Lanka is seen speeding up slightly to 4 percent in 2019.
 
Notably, and despite increasing conflicts and growing fragility, Afghanistan is expected to increase its growth to  2.7 percent rate this year.

In this otherwise positive outlook, Pakistan’s growth is projected to slow to 3.7 percent in fiscal year 2018-19 as the country is tightening its financial conditions to help counter rising inflation and external vulnerabilities.

However, activity is projected to rebound and average 4.6 percent over the medium term.