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South Asia Economic Focus | Spring 2022

Reshaping Norms: A New Way Forward


The uneven recovery from the pandemic has left countries in South Asia with multiple policy challenges, exacerbated by the impact of the war in Ukraine. While several countries are navigating rising inflation and growing difficulties to finance fiscal deficits and trade deficits, the region must also chart a new way forward to address rising inequality, accommodate an energy transition, and unleash new growth potential. To reshape their economies, the region cannot avoid redesigning tax systems, increasing competition, and challenging vested interests and existing gender norms. This issue of the South Asia Economic Focus, 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.



Chapter 1 | Stronger Headwinds during Recovery

As South Asia emerges from the shadows of the COVID-19 pandemic, the recovery has been highly uneven. Economies in the region face existing and built-up challenges from rising commodity prices, lingering supply constraints, and financial sector vulnerabilities. The war in Ukraine threatens to exacerbate these challenges. Facing these headwinds, carefully designed monetary and fiscal policy supports are needed to weather external shocks and sustain recovery. 


Chapter 2 Charting the Course to a New Normal

GDP has mostly recovered to pre-pandemic levels: growth in the region will be 6.6 percent in 2022, though 1 percentage point lower than the January forecast in large part due to the effects of the war in Ukraine. Though South Asia has limited trade and financial links with Russia and Ukraine, higher commodity prices in global markets are expected to drag down this year’s GDP growth. The challenges ahead are extraordinarily complicated for South Asian policymakers. The high oil prices and uncertainty in international oil markets are an incentive to accelerate the transition to a low-carbon development path. Such a path will boost energy security and make development more sustainable. The chapter illustrates this by simulating the region-wide macroeconomic impacts of carbon pricing.


Chapter 3Reshaping Social Norms about Gender: A New Way Forward

Social norms can be a key obstacle to achieving gender equality. This is well-known but the channels through which social norms influence gender disparities have not been systematically explored. This chapter shows that, in South Asia, despite decades of rapid economic growth, rising education, and declining fertility, women continue to face greater disadvantages in accessing economic opportunities than in most of the developing world. While progress has been made, improvements are slow and increasing income levels do not seem sufficient to reduce the stubbornly large gender gaps. Deeply rooted social norms, especially those about household division of labor, account for a large share of these gaps in women’s economic engagement. The chapter provides original evidence of the usefulness to define more clearly social norms and distinguish them from other factors like attitudes, customs, or morals. The chapter concludes that to adequately address gender inequality, policies cognizant of social norms, how they change, and how to address their impact need to be set in place.

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A boy locking oil commodity

COVID-19 quietens, South Asia faces stronger headwinds and shifting risks

As the gusts of the COVID-19 pandemic quieten, South Asian economies, left fragile and uneven in their recovery, are facing renewed headwinds: high inflation, rising fiscal deficits, and deteriorating current account balances are disrupting growth. These are further exacerbated by the war in Ukraine, which has led to skyrocketing global commodity prices. In this blog, we analyze the overarching trends highlighted in the SAEF—informed by feedback from the bi-annual survey of the South Asia Economic Policy Network (SAEPN), a group of policy makers, academics, and macroeconomists across the region.

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