According to the latest report issued by the World Bank, many countries in South Asia are recording a high growth of over six percent except Pakistan, which is growing at 4.5 percent in 2016, down from 5.5 percent in 2015. However, its growth is projected at 4.8 percent in 2017 due to good performance of the industrial and services sectors supported by foreign investment, low oil prices and substantial remittances from expatriate Pakistanis. The report South Asia Economic Focus says that there is a need to improve energy situation, create a business-friendly environment and introduce tax reforms to substantiate the achievements of comprehensive growth. The prospects of economic performance remained strong in South Asian region because of limited exposure to global turbulence. The report says that South Asia has sown resilience in the face of challenges posed by the international markets and remained one of the fastest-growing regions in the world where the economic growth will gradually accelerate from 7.1 percent in 2016 to 7.3 percent in 2017.
The report warns that the governments in the region will have to find a balanced approach towards fiscal consolidation as fiscal policies have a wide range of impacts on the economic development. According to World Bank South Asia Chief Economist Martin Rama, capital expenditures are required for growth while taxes and social spending matter for equity. Besides, the fiscal deficit affect macroeconomic stability. He also says that the low oil prices have given a good opportunity to the policymakers in South Asian region to introduce or expand explicit carbon taxes which will also improve environmental and fiscal sustainability.
The report projects that Afghanistan’s growth will marginally increase from 1.9 percent in 2016 to 2.9 percent in 2017, which will be one of the lowest in South Asia. However, Bangladesh’s growth will sustain at 6.8 percent in 2017 compared to 6.3 percent in 2016 and economic activities in Bhutan are expected to grow at 6.8 percent in 2017 compared to 6.7 percent in 2016. In Maldives, the gross domestic product is expected to remain at 3.5 percent in 2016 and at 3.9 percent in 2017. India’s GDP growth is expected to remain at 7.7 percent in 2017 compared to 7.5 percent in 2016 and Nepal’s growth prospects to remain at 1.7 percent in 2016 compared to 3.4 percent in 2015. The economic growth in Sri Lanka is project at 5.3 percent in 2016, up from 4.8 percent in 2015 due to increased public investment. However, the country is facing reduction in exports and remittances as well as challenges of public debt, lower reserves and rising inflation.
The lesson to learn: there is a need to study economic models of Bangladesh and India which are recording higher growth despite facing similar challenges as of Pakistan.