Overview

  • South Asia is expected to remain the fastest-growing region in the world.

    Growth in South Asia is forecast to pick up to 6.9 percent in 2018 - reflecting India's reemergence from a slowdown.

    Growth should further strengthen to 7.1 percent on average in 2019-20, reflecting a broad-based improvement across most of the region.

    South Asia should maintain its position as the fastest growing region and even extend its lead over East Asia and the Pacific.

    While this forecast is broadly unchanged from January 2018, the expected growth rate is slightly lower, mainly due to a downward revision for Pakistan in 2019.

    The baseline scenario assumes an ongoing, but gradually moderating recovery in the global economy and global trade, higher commodity prices, and gradual tightening of global financing conditions. Although risks to the forecast have become more balanced, with potential for further upside surprises to global growth, they are still tilted to the downside.

    Despite more favorable international conditions, domestic demand will remain the main driver of economic growth.

    Private consumption is expected to firm and offset a moderation in public consumption as fiscal policy gradually tightens. Gross fixed capital formation should remain above 7 percent over the forecast horizon. Private investment is expected to accelerate and offset moderating public investment.

    Import growth will peak in 2018, and moderate to around 6 percent in 2020, helping reduce the pressure on the current account. Export growth, which underperformed last year, is expected to strengthen to 6 percent in 2019, which is nevertheless lower than projected in January.

    Last Updated: Oct 03, 2018


    GDP (current US$)


    Growth rates will be robust across most countries in South Asia, with the exception of Afghanistan.

    Real GDP growth in South Asia

    2016

    2017

    2018 (e/f)

    2019 (f)

    2020 (f)

    Afghanistan (CY)

    2.3

    2.7

    2.4

    2.8

    3.2

    Bangladesh (FY)

    7.1

    7.3

    7.9

    7.0

    6.8

    Bhutan (FY)

    7.4

    5.8

    4.6

    7.6

    6.4

    India (FY)

    7.1

    6.7

    7.3

    7.5

    7.5

    Maldives (CY)

    6.2

    7.1

    8.0

    6.3

    5.6

    Nepal (FY)

    0.6

    7.9

    6.3

    5.9

    6.0

    Pakistan (FY, factor costs)

    4.6

    5.4

    5.8

    4.8

    5.2

    Sri Lanka (CY)

    4.5

    3.3

    3.9

    4.0

    4.1

    CY: Calendar Year, FY: Fiscal Year, e: Estimate, f: Forecast.

    • Afghanistan. Growth is projected to pick up, but only to 3.2 percent by 2020. Importantly, this projection presumes a recovery of confidence after a temporary weakening due to security challenges and political uncertainty in the context of the upcoming parliamentary and presidential elections.  
    • Bangladesh. Growth will be strong, driven by consumption and public investment, but it is expected to slow to an average of 6.9 percent over the forecast horizon. This is due to a projected slowdown of private investment and an increase in imports.
    • Bhutan. Growth will accelerate with the commissioning of two major hydropower projects, Mangdechhu and Punatsangchhu-II. The growth rate is projected to jump from 4.6 percent in this fiscal year to 7.6 percent in FY 2019/20, before moderating again to 6.4 percent in FY 2020/21.
    • India. Prompted by the adoption of the Goods and Services Tax and the recapitalization of banks, growth in India is firming up and it is projected to accelerate further. Growth is expected to rise to 7.3 percent in FY 2018/19, and to 7.5 percent in the following two years, with stronger private spending and export growth as the key drivers.
    • Maldives. Growth is projected at a very strong 8.0 percent this year, based on the dynamism of the construction and tourism sectors. But it is projected to decelerate in the next two years as new capital investment projects gradually begin to taper off.
    • Nepal. Economic activity is set to grow on average 6 percent over the medium term. However, performance could be less impressive if the challenging transition to a federalist system affects infrastructure provision and service delivery.
    • Pakistan. Macroeconomic stabilization policies will take a toll on growth this fiscal year. GDP growth is expected to lower to 4.8 percent in FY 2018/19, reflecting a tighter fiscal and monetary policy. However, with improved macroeconomic conditions, growth could reach 5.2 percent in FY 2019/20.
    • Sri Lanka. Economic growth is projected to recover from the effects of last year’s weather disruptions, which negatively impacted agriculture, and to remain around 4 percent in the next two years.

    World Bank Assistance

    The World Bank approved $10.7 billion in lending and grants to the region for 61 projects in fiscal year 2018, including $4.5 billion IBRD and $6.1 billion in IDA commitments. The Bank also delivered 145 advisory services and analytical products, providing technical advice on such issues as competitiveness, energy sector reform, trade, social protection, jobs, and fragility. The Bank’s regional strategy continues to emphasize sustaining inclusive growth at a high rate. It focuses on providing support to private sector development through such actions as climate-resilient investments, greater social and financial inclusion, strengthening governance, and addressing fragility. 

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    Last Updated: Oct 05, 2018


    GNI per capita, Atlas method (current US$)

  • South Asia has had the highest growth rate among the regions since mid-2014.

    Robust growth has translated into declining poverty and impressive improvements in health and education.

    However, as of 2013, the proportion of people living on less than $1.90 a day was estimated at 14.7 percent, or about 249 million people—a third of the global poor.

    Moreover, many countries in the region suffer from extreme forms of social exclusion and significant infrastructure gaps.

    The high growth has also not translated into creating jobs at the pace needed to accommodate around 1.5 million people entering the labor force every month. The rate of women's participation in labor markets is very low at 28 percent and is even declining in some countries.

    Some recent events are also changing the region's development path, including i) increasing conflict and fragility risks, resulting in displacement surge in Afghanistan and Bangladesh, and impeding regional integration efforts; ii) disorganized and poorly planned urbanization, as reflected in the widespread slums and informal urban settlements, home to at least 130 million people across the region, as well as growing population, congestion, and pollution; and iii) increasing changes in temperature and extreme weather events – with rapid glaciers melt, floods and a growing number of hot spots.

    To respond to these existing and emerging needs, the WBG operational framework for South Asia focuses on three themes: (i) Supporting Sustainable Growth, (ii) Investing in People and (iii) Addressing Fragility.

    To support Sustainable Growth, we are deepening dialogue on the tough structural reforms to create a sustainable macro environment, and an enabling framework for the private sector and job creation. We are prioritizing investments in (i) clean renewable energy (ii) enhancing the livability and growth potential of our iconic cities; as well as decongesting cities and addressing pollution with investments in public transport and (iii) transformational rural growth (promoting climate smart agriculture and agri-business). 

    To strengthen Human Capital as a driver of growth, we are focusing on improving access and quality of education, addressing stunting and malnutrition, expanding support on skills, strengthening health systems and services, improving governance; and supporting safety nets to protect the poorest families. One key priority we are committing to this year is women workforce participation, given its multiplier effect. We are using our engagement in the region to enhance our focus on skills and financial inclusion, as well as improving access to safe transport for women.

    To address Fragility, we are scaling up our engagement on displacement to deal with the recent surge and support basic services and economic opportunity for the refugees, returnees, IDPs and host communities in Afghanistan, Pakistan and Bangladesh. In all South Asian countries, we are working to strengthen public institutions and address governance and corruption risks, including our support to the decentralized governance in Nepal under the newly introduced federalism structure.

    The countries in the region cannot grow alone, and South Asia's integration is essential to sustain current growth in the medium to long-term. Our role in supporting regional cooperation efforts remains critical and we continue working on energy and electricity trade and transport, and pursuing long-term water security in the region.

    Last Updated: Oct 05, 2018


    Gross enrollment ratio, primary, both sexes (%)

  • World Bank support has helped South Asia achieve the following results, among others:

    • Afghanistan: Bringing most of the efforts in public health service delivery under one umbrella in Afghanistan, the World Bank’s System Enhancement for Health Action in Transition (SEHAT) Project aims to support the implementation of a Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS) through contracting arrangements across the country. SEHAT also supports efforts to strengthen the capacity of the Ministry of Public Health at central and provincial levels to effectively carry out its stewardship functions.
    • Bangladesh: Bangladesh has made remarkable gains in ensuring access to education in the past two decades. As of 2015, the country’s net enrollment rate at the primary school level is above 90 percent, and secondary school level is around 62 percent. With nearly 6.4 million girls in secondary school in 2015, Bangladesh is among the few countries to achieve gender parity in school enrollment, and has more girls than boys in secondary schools.
    • India: A $1.5 billion World Bank project approved in 2016 is supporting the rural component of India’s Swachh Bharat (Clean India) Mission, the largest-ever drive to improve sanitation in India. The project aims to end open defecation by October 2, 2019, the 150th anniversary of Mahatma Gandhi’s birth. 
    • Nepal: Vocational training provided to 4,400 young women leading to employment and economic independence
    • Pakistan: 2,370 MW power projects supported by IFC and MIGA with 4.4 m tons of CO2 avoided, to be complemented by planned Bank projects
    • Sri Lanka: Supporting conflict-affected communities: 1 million people living in 1,000 communities received support through 3,200 community infrastructure projects

    Last Updated: Jul 16, 2018

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Washington
Joe Qian
jqian@worldbank.org
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