South Asia’s growth rate has returned to pre-pandemic levels. However, the uneven recovery from the pandemic has left countries in South Asia with multiple policy challenges, which are exacerbated by the impact of the war in Ukraine. This report describes recent economic developments, analyzes the economic impact on South Asia of the war in Ukraine, presents growth forecasts, provides risk scenarios, and concludes that reshaping economies goes hand in hand with reshaping norms.
The emergence of a new services economy creates an opportunity for the region to shift gears and to move towards a services-led development model. This new services economy comprises not just the ICT sector, but also business and professional services that are increasingly critical inputs into manufacturing and other sectors, and digital platforms that are creating new markets.
Hidden Debt examines the trade-off between tackling development challenges through direct state presence in the market and avoiding unsustainable debt due to economic inefficiencies of such off–balance sheet operations, which greatly leverage public capital.
This report investigates the extent to which the BC reduction policies of South Asian countries may affect glacier formation and melt within the context of a changing global climate. It assesses the relative impact of each source of black carbon on snow and glacier dynamics.
Prospects of an economic rebound in South Asia are firming up as growth is set to increase, climbing from historic lows in 2020 and putting the region on a path to recovery. But growth is uneven and economic activity well below pre-COVID-19 estimates, as many businesses need to make up for lost revenue and millions of workers, most of them in the informal sector, still reel from job losses, falling incomes, worsening inequalities, and human capital deficits.
The COVID-19 pandemic, which is still impacting South Asia, has temporarily brought the region to a near standstill. Governments proactively stabilized activity through monetary easing, fiscal stimulus, and supportive financial regulation, but the situation is fragile amid weak buffers and exhausted policy tools.
The unprecedented COVID-19 crisis comes with a dire economic outlook. South Asia might well experience its worst economic performance in 40 years. On top of the deterioration of the international environment, the lockdown in most countries has frozen large parts of the domestic economy. Public banks, discussed in the focus chapter of this edition, were at the center of weaknesses in financial sectors that accumulated during recent years.
In many countries across the region, further decentralization is a high policy priority. These policies are part of a global decentralization trend, which aims to improve local service delivery. Empirical evidence of the effectiveness of decentralization is mixed, a result which is often attributed to partial decentralization. Successful development requires both decentralization and centralization at the same time. In the interplay between central and local governments, the allocation of resources plays a crucial role.
South Asia remained the fastest growing region in the world last year, but growth remained driven by domestic demand – and not exports – which resulted in another year of double-digit volume growth of imports. Using a gravity model, we show that South Asian countries export only a third of their potential. If countries export closer to potential, not only would short-term adjustments be easier, but also the long-term growth potential would be higher.
