Washington: Bangladesh and Nepal are estimated to grow faster than India in 2019, according to the World Bank, which said that overall growth in South Asia is projected to slow down this fiscal in line with a global downward trend.
Pakistan’s growth rate is projected to deteriorate further to a mere 2.4 per cent this fiscal year, as monetary policy remains tight, and the planned fiscal consolidation will compress domestic demand, it said.
Growth in South Asia is projected to fall to 5.9 per cent in 2019, down 1.1 percentage points from April 2019 estimates, casting uncertainty about a rebound in the short term, the World Bank said in its latest report.
The latest edition of the South Asia Economic Focus, Making (De)centralization Work, finds that strong domestic demand, which propped high growth in the past, has weakened, driving a slowdown across the region.
Imports have declined severely across South Asia, contracting between 15 and 20 per cent in Pakistan and Sri Lanka.
In India, domestic demand has slipped, with private consumption growing 3.1 per cent in the last quarter from 7.3 per cent a year ago, while manufacturing growth plummeted to below 1 per cent in the second quarter of 2019 compared to over 10 per cent a year ago.
“Declining industrial production and imports, as well as tensions in the financial markets reveal a sharp economic slowdown in South Asia,” said Hartwig Schafer, World Bank Vice President for the South Asia Region.
“As global and domestic uncertainties cloud the region’s economic outlook, South Asian countries should pursue stimulating economic policies to boost private consumption and beef up investments, he said.
The report noted that South Asia’s current economic slowdown echoes the decelerating growth and trade slumps of 2008 and 2012.
With that context in mind, the report remains cautiously optimistic that a slight rebound in investment and private consumption could jumpstart South Asia’s growth up to 6.3 per cent in 2020, slightly above East Asia and the Pacific and 6.7 per cent in 2021.
In a focus section, the report highlights how, as their economies become more sophisticated, South Asian countries have made decentralisation a priority to improve the delivery of public services.
“Decentralisation in South Asia has yet to deliver on its promises and, if not properly managed, can degenerate into fragmentation, said Hans Timmer, World Bank Chief Economist for the South Asia Region.