Recent developments: Growth in South Asia slowed to a still strong 6.5 percent in 2017, in part reflecting businesses’ adjustment in India to the country’s new Goods and Services Tax and to the adverse impacts of natural disasters across the region.
India is estimated to grow 6.7 percent in fiscal year 2017/18, which ends March 31, slightly down from the 7.1 percent of the previous fiscal year. This is due in part to the effects of the introduction of the Goods and Services Tax, but also to protracted balance sheet weaknesses—including corporate debt burdens and non-performing loans in the banking sector—weighing down private investment.
Pakistan’s growth is forecast to tick up to 5.5 percent in FY 2017/18, which ends June 30, with strong activity in construction and services, a recovery in agricultural production, and robust domestic demand supported by strong credit growth and investment projects. However, the current deficit widened to 4.1 percent of GDP, amid weak exports and buoyant imports.
In Sri Lanka, activity expanded at an estimated 4.1 percent in 2017, slightly below expectations as a result of severe weather disruptions. Bangladesh’s growth for FY 2017/18, which ended June 30, is anticipated to slow to 6.4 percent from 7.2 percent in the preceding fiscal year.