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Growth in South Asia, already uneven and fragile, will be slower than previously projected, due to the impacts of the war in Ukraine and persistent economic challenges, says the World Bank in its twice-a-year regional update. 

According to the latest South Asia Economic Focus Reshaping Norms: A New Way Forward the region is projected to grow by 6.6 percent in 2022 and by 6.3 percent in 2023. The 2022 forecast has been revised downward by 1.0 percentage point compared to the January projection.  

Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, increasing fiscal deficits, and deteriorating current account balances.   

Though GDP growth continues to be solid during the recovery, all countries in the region will face challenges ahead. In India, household consumption will be constrained by the incomplete recovery of the labor market and inflationary pressures. Maldives faces vulnerabilities due to its large imports of fossil fuels as share of GDP and a reduction in tourists from Russia and Ukraine. In Sri Lanka, the economic outlook is highly uncertain due to fiscal and external imbalances. In Afghanistan, higher food prices will exacerbate food insecurity. One of Pakistan’s challenges in the current environment is its energy subsidies, which are the largest in the region. Bangladesh will face weaker demand from Europe for its exports. On a positive note, exports of services from the region are on the rise.  

The war and its impact on fuel prices can provide the region with much-needed impetus to reduce reliance on fuel imports and transition to a green, resilient and inclusive growth trajectory. South Asian countries should steer away from inefficient fuel subsidies that tend to benefit wealthier households and deplete public resources. They should also move towards a greener economy by gradually introducing taxation that puts tariffs on products which cause environmental damage.  

Last Updated: Apr 13, 2022

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Sources: World Bank Macro Poverty Outlook and staff calculations.                                                                                                                 

Note: (e)=estimate, (f)=forecast, * = excludes Sri Lanka. 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. GDP measured in 2015 prices and market exchange rates. Pakistan is reported at factor cost. Afghanistan is not included in the regional aggregates as Afghanistan is not producing statistics so there are no estimates or forecasts beyond 2020.

Last Updated: Apr 13, 2022

GNI per capita, Atlas method (current US$)

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