Zafar is among millions of Pakistanis who do not give up hope in the face of adversity, and the harder the challenge, the more resolute they become in overcoming it. Zafar belongs to Utror, a back-of-beyond place in Pakistan’s north-west. Situated in one of the more inaccessible valleys of Swat in the Kyber Pakhtunkhwa province, the inhabitants of Utror could only dream of having electricity till Zafar, one of their own, returned home with skills of an electrician honed in Punjab where he had gone in search of education.
The world South Asia will face after this crisis is not going to be the same as in the past. The trend that is accelerating after the financial crisis is that of the “new normal”: the shift in traditional engines of growth from industrial countries to emerging markets.
The crisis is accelerating this fundamental change in economic order in which developed countries have to save more and spend less, while emerging markets, such as China, India, Indonesia, Brazil, Russia, and South Africa begin to play much bigger roles in driving the global recovery. According to our estimates, by 2020, in just ten years---Asia may see its share of world GDP (in nominal dollars) climb to over one-third, replacing North America and the European Union as the biggest region. Underlying this is an expected sharp rise in shares of China and India, and indeed, that of all emerging markets may climb to nearly one-half of global output.
The future is unpredictable and yet, from time to time, we must take stock of what we accomplished and where we are heading. Over the past decade, better policies and rising integration with the global economy have pushed growth in South Asia upwards. By 2007, the peak year just before the global financial crisis, the region’s GDP growth had reached nearly 9 percent a year (just slightly behind East Asia’s). This growth acceleration extended to all the countries of the region.
The global financial crisis took South Asia’s growth down by about 3 percentage points (from 8.6% in 2007 to 5.6% in 2009). This was the smallest growth decline among all regions of the world and the prospective recovery is already underway. The World Bank expects GDP growth to recover to nearly 7 percent per annum on average in 2010-2011.
Dipak Dasgupta, a Lead Economist at the World Bank, points to four key factors that have cushioned South Asia’s growth decline during the crisis and are helping in the strong recovery.
(1) Remittances held up much stronger in South Asia than in other regions. In Nepal, the reliance on remittances is the highest, and without these flows, growth in consumption would have collapsed.
(2) The resilience of some key export-oriented sectors also helped. Garments in Bangladesh and IT software exports from India, for instance, have held up relatively well.