Political turmoil: Early estimate puts losses at 2.1% of GDP, says WB

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Growth is expected to pick up across most of South Asia (by fiscal year) . PHOTO: WORLD BANK SOUTH ASIA REPORT

KARACHI: The World Bank has said that though it is too early to assess the impact of recent political turmoil on investor confidence and growth prospects, an early estimate suggests short-term losses equivalent to 2.1% of gross domestic product.

It forecast that economic growth of the country would be 4.4% in FY15 after 4.1% in the previous year.

Overall economic growth in South Asia is forecast to accelerate by 2016, led by an increase in activity in India, the biggest economy in a region that has the world’s largest concentration of poor people, the bank said in a report.

In the twice-a-year South Asia Economic Focus, the World Bank said the region’s economy will expand by a real 6% in 2015 and by 6.4% in 2016 compared to 5.4% this year, potentially making it the second fastest growing region in the world after East Asia and the Pacific.

The Indian economy, 80% of the region’s output, is set to grow by 6.4% in fiscal year 2015-16 after 5.6% in 2014-15. Other countries in the region are Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal, Pakistan and Sri Lanka.

“The outlook over the next years for South Asia indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side,” said World Bank Chief Economist for South Asia Martin Rama. “Future growth will increasingly depend on strong investment and export performance.”

India is benefiting from a ‘Modi dividend’, the report said, with economic activity buoyed by expectations from the newly elected government of Prime Minister Narendra Modi.

Over the next year or so, economic growth should be supported by the recovering US economy that would provide a market for Indian merchandise and service exports. Private investment is expected to pick up thanks to the government’s business orientation, and declining oil prices should boost private sector competitiveness.

But economic reforms will be needed for India to achieve its full long-term growth potential, the report argued.

Regaining political stability and with a renewed focus on growth, Bangladesh is forecast to grow by 6.2% in FY15 and an estimated 6.1% in the past fiscal year. Remittances are expected to finance higher domestic consumption, while infrastructure investments will support strong aggregate demand.

Sri Lanka is expected to continue its strong growth, at 8.2% in 2015 rising from 7.8% this year. Afghanistan is on a more fragile path, dominated by security and political concerns, after having grown by a modest 1.5% in 2013.

Published in The Express Tribune, October 9th, 2014.

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Political turmoil: Early estimate puts losses at 2.1% of GDP, says WB – The Express Tribune