On Tuesday, the World Bank predicted that South Asia will grow by 5.8% this year, positioning it as the fastest-growing region worldwide, although still trailing pre-pandemic rates. The announcement came during the release of the October 2023 development updates for India and South Asia in New Delhi, India.
Franziska Ohnsorge, the World Bank's Chief Economist for South Asia, and Auguste Tano Kouamé, Country Director for India, were among the key speakers at the event. They highlighted that despite high inflation and interest rates impacting many emerging markets, South Asia is progressing forward.
However, Ohnsorge emphasized that all countries in the region are experiencing a slowdown from pre-pandemic levels. She noted that the current growth rate isn't rapid enough to meet various development goals set by countries in the region.
The World Bank's latest South Asia Development Update also projected a slight deceleration in regional growth to 5.6% in 2024 and 2025 as post-pandemic rebounds subside and reduced global demand impacts economic activity.
While India is expected to maintain robust growth with a forecast of 6.3% in the 2023-24 fiscal year, other countries like Maldives and Nepal are also set to expand due to a rebound in tourism. However, growth is anticipated to slow down in Bangladesh to 5.6%, and Pakistan's projected growth of only 1.7% is below its population growth rate.
The report also highlighted concerns about government debt in South Asian countries which averaged 86% of GDP in 2022, higher than other emerging markets. This high debt could escalate the risk of defaults and increase borrowing costs.
The World Bank also released its latest India Development Update on Tuesday, revealing that despite a challenging global economic environment, India was one of the fastest-growing major economies in the previous fiscal year at 7.2%. This placed it as the second highest among the Group of 20 countries and nearly double the average for emerging market economies.
However, with persistent global challenges such as high interest rates, geopolitical tensions, and sluggish global demand, overall economic growth is likely to decelerate in the medium-term. The World Bank predicts India's GDP growth for the current fiscal year to be 6.3%, attributing it mainly to external factors and diminishing pent-up demand post-COVID-19 pandemic.
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