´South Asia Economic Update 2010, Moving Up, Looking East´, the WB´s first yearly assessment of the economies of the region released Monday states that rising domestic confidence combined with government fiscal and monetary stimulus packages will make South Asia second fastest growing region in 2010 and 2011. [break]
It estimates the region to grow by about 7 percent in 2010 and nearly 8 percent in 2011, making it the second-fastest growing region after East Asia and Pacific. But countries with weaker fundamentals, unresolved conflict or post-conflict issues, and heavily exposed to the global downturn, such as Nepal will continue to suffer from slower recovery, says the report.
“Nepal will grow at slower rate of about 4 percent in 2011,” it states.
Maldives and Pakistan too are estimated to grow at similar lower rate.
The report projects India´s growth to rise to 9 percent in 2011, Bangladesh to 6.4 percent, Bhutan to 7 percent, and Sri Lanka to above 6 percent amid improved optimism -- something which will help the region as a whole to recover from the global slowdown.
Andrew Steer, WB´s acting chief economist for South Asia, said that openness and reforms that the region managed to attain over the past fifteen years helped it to be resilient to the financial crisis of 2008.
But at the same time, the WB has also said that the region continues to face challenges from significant risks in the global environment, which is slowing worker remittances and exports due to hesitant and uncertain global recovery.
This means, countries in South Asia are still exposed to high risks because remittance is the biggest source of foreign earnings in the region, representing an average of 10 percent of GDP. The figure is 5 times larger than net foreign direct investment the region has been receiving.
Given the situation, the report suggests South Asia to integrate faster with East Asia, integrate more closely with countries within the region and preserve links to high-income markets like Europe and North America.
The report also suggests the South Asian countries to create more fiscal space and contain rising inflation in order to attain a sustained, durable and faster growth. “Boosting agriculture will also be vital to keep food prices moderate,” it adds.
In conflict affected countries like Nepal, the report pushes for strengthening the role of the state to deliver better services, creation of jobs and good governance to win the peace and ensure security. More trade among neighbors might help.
Related story
Households under risk of food insecurity to get identity cards
