South Asia Overview

Overview

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Context
Strategy
Results

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, mainly reflecting India emerging from its 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 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.
Growth rates should remain relatively stable across countries in South Asia. Growth in India is projected to accelerate to 7.3 percent this year, and to 7.5 percent in 2019 and 2020, reflecting stronger private spending and export growth. Sri Lanka’s GDP growth may average around 4.5 percent over the medium term, reflecting a recovery from the effects on agriculture of last year’s adverse weather disruptions, as well as robust consumption and investment growth. In Bhutan and Maldives, growth will continue to benefit from construction and services, and average 7.4 and 5 percent respectively over the forecast horizon. After the strong 2017 rebound from the effects of the devastating earthquakes, Nepal’s GDP growth is forecast to moderate to 4.6 percent this year and to average 4.5 percent over the medium term. In Pakistan, GDP growth is expected to moderate to 5.0 percent in 2019 reflecting tighter policies to unwind vulnerabilities accumulated over the past years. In the medium-term, growth in Pakistan is expected to rebound to 5.2 percent on average in 2019 and 2020, reflecting firming exports, and especially robust investment growth in connection to the China-Pakistan Economic Corridor. This is, however, lower than previously anticipated. In Bangladesh, growth is expected to recover from the effects of natural disasters and reach 6.7 percent in 2019, supported by improving exports and remittances. In Afghanistan, growth will remain subdued owing to weak confidence due to security challenges and political uncertainty. These outlooks assume continued reforms leading to improved confidence, macro stability, and increased export competitiveness.
Risks to the regional forecast are more balanced than in the January 2018 assessment, with potential for further upside surprises thanks to global growth. Downside risks are mainly related to the possibility of domestic policy slippages, such as a weakening of fiscal policies or setbacks in areas of reforms to improve the investment climate or to strengthen the banking sector. However, the region is also vulnerable to exogenous domestic events like increased insecurity and natural disasters. Although South Asia is not a larger exporter of goods, it could also be adversely affected by external shocks, such as escalating trade protectionism. And financial markets in the largest countries in the region could be jittery in the event of an abrupt tightening of global financial conditions.

Last Updated: Apr 15, 2018

GDP (current US$)

World Bank Assistance
The World Bank approved $6.0 billion in lending to the region for 51 projects in fiscal 2017, including $2.2 billion in IBRD loans and $3.8 billion in IDA commitments, of which $0.9 billion came from the IDA Scale-Up Facility. The Bank also delivered 122 advisory services and analytical products, providing technical advice on such issues as competitiveness, energy sector reform, 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.

Last Updated: Aug 03, 2017

GNI per capita, Atlas method (current US$)
Focusing on the drivers of sustainable growth
South Asia still remains home to more than 300 million poor, which is a third of the global poverty headcount. Economic growth may not be sustained as it is largely driven by consumption, not by investment or by exports, which would be needed to create jobs that absorb the new entrants to the labor market – estimated at between 1 million and 1.2 million every month for the next two decades. The Bank’s regional strategy continues to focus on what needs to be done most to sustain inclusive growth at a high rate and is based on three pillars:
support to private sector development including climate-resilient investments,
greater social and financial inclusion, and
strengthening governance and addressing fragility.
Implementing its Regional Gender Action Plan (RGAP)
The Bank is implementing its RGAP which is based on four pillars responding to the region’s most acute development needs – human capital, economic empowerment, voice-and-agency and regional capacity building and communication. For example, the $63 million Socioeconomic Empowerment of Adolescent Girls & Young Women Project in Jharkhand, India, will support adolescent girls and young women, to complete their secondary level education and acquire relevant skills for the job market. Also, gender approaches are operationalized across the board. For instance, multi-modal connectivity projects are specifically addressing barriers that women face in using transport facilities including issues of safety, lighting, separate toilets and waiting areas.
Supporting essential resilience to climate change
South Asia is highly vulnerable to the impacts of climate change, including climate-induced natural disasters and sea-level rise. Progress in South Asia depends on reducing carbon emissions, changing the energy mix, and mitigating climate change effects. The Bank is implementing a Climate Business Plan for South Asia in support of the countries’ Nationally Determined Contributions and their efforts to improve climate resilience.

CO2 emissions (metric tons per capita)

Promoting regional integration
Regional integration and economic cooperation can enhance the prospects for poverty reduction and shared growth. Yet South Asia remains one of the least integrated regions. A $150 million Regional Connectivity Project aims to improve conditions for Bangladesh’s trade with Bhutan, India, and Nepal through improving connectivity, reducing logistics bottlenecks, and supporting the adoption of modern approaches to border management and trade facilitation.
Supporting policy reforms
The Bank supports countries’ reform agendas, particularly focusing on enabling the creation of markets and improving the efficiency of the public sector at the national and subnational levels. For example, in Pakistan, the World Bank is supporting the government’s energy policy to reduce the cost of electricity production and to improve the financial sustainability of the power sector through a series of Power Sector Reform Development Credits, investment operations, and technical assistance.
Addressing fragility
The World Bank is partnering with the United Nations to confront the challenges of forced displacement. For example, the Bank is augmenting its programs in Afghanistan and Pakistan that support refugees, internally displaced people, returnees, and host communities. It also approved operations designed to support vulnerable people in these countries, such as the $228 million Citizens’ Charter Afghanistan Project, which aims to reduce poverty and enhance living standards by strengthening community development councils. A $100 million loan for the Pakistan National Social Protection Program will strengthen the national social safety net system and enhance access to social services for the poor.
Producing knowledge for improved competitiveness
The Bank published several important reports on South Asia this fiscal year. Competitiveness of South Asia’s Container Ports: A Comprehensive Assessment of Performance, Drivers, and Costs provides unprecedented analysis of the situation at the region’s ports and the steps needed for improvement, including building greater private sector participation, improving the governance of port authorities, and creating more competition within and between ports. South Asia’s Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse examines the region’s potential to boost the productivity and competitiveness of firms, and recommends reforms and investments

Last Updated: Aug 03, 2017

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: Aug 03, 2017