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Overview

Beset with Sri Lanka’s economic crisis, Pakistan’s catastrophic floods, a global slowdown, and impacts of the war in Ukraine, South Asia faces an unprecedented combination of shocks on top of the lingering scars of the COVID-19 pandemic. Growth in the region is dampening, underscoring the need for countries to build resilience.

According to the latest South Asia Economic Focus, Coping with Shocks: Migration and the Road to Resilience, regional growth is projected to average 5.8 percent this year - a downward revision of 1 percentage point from the forecast made in June. This follows growth of 7.8 percent in 2021, when most countries were rebounding from the pandemic slump.

While economic distress is weighing down all South Asian countries, some are coping better than others. Exports and the services sector in India, the region’s largest economy, have recovered more strongly than the world average while its ample foreign reserves served as a buffer to external shocks. The return of tourism is helping to drive growth in Maldives, and to a lesser extent in Nepal—both of which have dynamic services sectors. The combined effects of COVID-19 and the record-high commodity prices due to the war in Ukraine took a heavier toll on Sri Lanka, exacerbating its debt woes and depleting foreign reserves. Plunged into its worst-ever economic crisis, Sri Lanka’s real GDP is expected to fall by 9.2 percent this year and a further 4.2 percent in 2023.  High commodity prices also worsened Pakistan’s external imbalances, bringing down its reserves. After devastating climate-change-fueled floods submerged one-third of the country this year, its outlook remains subject to significant uncertainty.

Inflation in South Asia, caused by elevated global food and energy prices and trade restrictions that worsened food insecurity in the region, is expected to rise to 9.2 percent this year before gradually subsiding. The resulting squeeze on real income is severe, particularly for the region’s poor who spend a large share of their income on food.

Last Updated: Oct 06, 2022

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Sources: World Bank Macro Poverty Outlook and staff calculations.
Note: (e)=estimate, (f)=forecast. GDP measured in 2015 prices and market exchange rates. To estimate regional aggregates in the calendar year, fiscal year data is converted to calendar year data by taking the average of two consecutive fiscal years for Bangladesh, Bhutan, Nepal, and Pakistan at 2015 constant US$, for which quarterly GDP data are not available. Pakistan is reported at factor cost. Afghanistan is not producing national accounts statistics since August 2021, so they are excluded from the table.

 

Last Updated: Oct 06, 2022

GNI per capita, Atlas method (current US$)

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