South Asia

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

_{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

The World Bank approved $9.0 billion in lending to the region for 44 operations in fiscal 2022, including $4.8 billion in IBRD commitments and $4.2 billion in IDA commitments. We also approved 33 advisory services and analytical products for eight countries, totaling $6 million. These provided technical advice on issues such as pandemic preparedness and vaccination, debt management, job creation, female labor force participation, air pollution, disaster risk management, and climate resilience.

In South Asia, we are focused on accelerating investments in human capital to drive inclusive development; promoting green growth; and strengthening resilience across the economy, markets, and society.

Responding to crises

We continue to support the people of Afghanistan following the August 2021 political crisis through the multidonor Afghanistan Reconstruction Trust Fund. This finances projects that support community livelihoods, food security, education, primary health care, and NGOs capacity with a focus on women and girls. These projects are implemented by UN agencies and international nongovernmental organizations. We also moved quickly to support the people of Sri Lanka through the worst economic crisis in decades by reallocating financing from existing projects to meet emergency needs in health, social protection, agriculture, and energy. In the aftermath of Pakistan’s catastrophic floods, we are repurposing funds from projects to support urgent needs and are preparing emergency operations for reconstruction and rehabilitation.

Accelerating investments in human capital

Despite major progress, South Asia faces large and persistent human capital deficits. These have been exacerbated by the COVID-19 crisis, which has slowed progress or wiped out gains entirely. On average, children born in the region today can expect to attain only 48 percent of their full potential. To address these gaps, we are helping strengthen health systems, expand access to primary care, and build stronger social protection systems that are targeted and responsive in the wake of shocks. We also support education policies that ensure learning for all, build skills for future needs, and improve access to labor markets.

In India, a $125 million project is helping the state of West Bengal develop a consolidated social registry that will expand coverage and access to social assistance for poor and vulnerable groups. In Pakistan, we are supporting a series of operations at the federal and provincial levels to improve primary health and education outcomes, boost livelihoods, deepen targeted social safety nets, and strengthen crisis preparedness.

Despite decades of economic growth, rising education, and declining fertility (though still high compared with the rest of the region), Pakistani women still face significant barriers to opportunity. Our program in Pakistan supports policy reforms to improve women’s economic participation by extending access to fair wages and social security for informal home-based workers, most of them women; improving access

to child care, separate toilets, and transportation for women workers in the formal sector; achieving equal pay; and ending sex-based discrimination. Our analytical work explores how countries in the region can help tackle barriers to women’s labor force participation and boost the quality of jobs in both the formal and informal sectors.

Building resilience across the economy

We help countries unlock new sources of opportunity, growth, and jobs by supporting private sector–led solutions, better debt and investment transparency, access to markets and credit for SMEs, and digital transformation. Our research examines ways that countries can move away from manufacturing-led growth toward a services-led development model that strengthens long-term resilience.

In Bangladesh, we are helping build a stronger fiscal and financial sector, modernize taxes, and foster a globally competitive export industry. We are also supporting cash transfer platforms that can respond faster to extreme climate events, such as floods and cyclones. In Nepal, a $150 million operation is helping increase financial sector stability, diversify financial solutions, expand access to financial services, and open up capital, insurance, and disaster-risk financing markets. It also supports policy measures that introduce principles and incentives for green lending.

Promoting green growth

About 80 percent of South Asia’s major cities are exposed to floods, and rising sea levels pose storm surge risks for low-lying, densely populated coastal areas. Water and food systems are particularly stressedmore variable rainfall and higher temperatures are causing water scarcity, reducing crop productivity, and affecting food prices, nutrition, and farmers’ livelihoods. The changing climate could sharply diminish living conditions for up to 800 million people across the region.

In fiscal 2022, we launched our South Asia Climate Roadmap to help countries address climate risks, deliver more and better jobs, and reduce poverty by leveraging opportunities for climate action. This includes shifting to more efficient and livable cities, investing in clean energy systems, and promoting climate-smart agriculture. In Bangladesh, a $120 million project is helping protect crops and fisheries through better flood management as well as climate-smart irrigation and drainage; these efforts

are promoting food security, boosting livelihoods, and improving productivity. In Sri Lanka, a $92 million project is modernizing forecasting for weather, floods, and landslides; improving early warning systems; and investing in flood-resilient infrastructure, benefiting more than 11 million people. And in Bhutan, we are strengthening resilience to climate change and natural disasters through an innovative risk assessment that will inform investments in agriculture and road construction.

Promoting regional integration and cooperation

We promote regional cooperation to improve economic connectivity, climate resilience, and human development. Our Regional Investment Pioneers in South Asia report analyzes barriers to intraregional investments and recommends policy actions, and our report on South Asia’s Digital Opportunity explores how digital transformation offers pathways to a more robust regional economy.

In Bangladesh, Bhutan, India, and Nepal, we are supporting the rehabilitation of 3,500 km of inland waterways and interlinking them with roads and railways. We also launched a multiphase program to accelerate transport and trade connectivity in the eastern part of the region, with an initial investment of over $1.1 billion in Bangladesh and Nepal. Our Climate Innovation Challenge and the TechEmerge Resilience India Program support pilot solutions to address climate needs and boost disaster resilience.

We also engage through regional forums for collective action, including WePower, a network of women professionals in the energy and power sectors, and the South Asia HydroMet Forum, a platform to improve weather information and climate services.

Last Updated: Oct 06, 2022

Since the onset of the global pandemic in March 2020, the World Bank has supported South Asia with more than $31 billion. Initially focused on the health emergency, our priority going forward is to help pave the way for a green, resilient, and inclusive recovery.

• Over 857 million vulnerable people across South Asia directly benefited from $2.73 billion of funding provided by 10 projects that supported social safety nets. These funds provided social assistance to the poorest families, helping them buy critical medical supplies and food.
• $2.5 billion provided for 15 health projects helped establish or equip more than 23,000 hospitals and healthcare centers to provide better care for COVID-19 patients.
• $4.1 billion funded 24 education projects including support to respond to school disruptions caused by the COVID-19 pandemic, enhance digitization, expanding access for remote learning, and provide needs-based training that is benefitting millions of students and teachers.
• The World Bank has made available more than $1 billion to support vaccine purchase and deployment in six South Asian countries. More than 127 million doses have been purchased and 112 million doses delivered, with 105.2 million of those already administered.

While providing emergency support to South Asia's crisis response, we have also remained focused on longer-term priorities such as climate change, delivering over $10 billion of climate finance in the region since March 2020, 53 percent of which is supporting adaptation actions.

Read South Asia and the World Bank: Stories of Resilience and Recovery for more. 

Last Updated: Oct 06, 2022