S Asia likely to grow by 5.8% in 2023, 5.6% in 2024, 2025: World Bank

In its ‘South Asia Development Update—Towards Faster, Cleaner Growth’ released in Dhaka yesterday, the financial organisation forecast that growth in the region will slow to 5.6 per cent in 2024 and 2025 as post-pandemic rebounds fade and a combination of monetary tightening, fiscal consolidation and reduced global demand weighs on economic activity.

Growth prospects are subject to downside risks, including due to fragile fiscal positions, it noted.

“While South Asia is making steady progress, most countries in the region are not growing fast enough to reach high-income thresholds within a generation,” said Martin Raiser, World Bank vice president for South Asia in a release.

“Countries need to urgently manage fiscal risks and focus on measures to accelerate growth, including by boosting private sector investment and seizing opportunities created by the global energy transition,” he cautioned.

For South Asia, energy transition could present an opportunity for future growth and job creation—if it leads to more investments by firms, cuts air pollution, and reduces the reliance on fuel imports.

“South Asia’s energy intensity of output is about twice the global average and the region lags in the adoption of more advanced energy-efficient technologies,” said Franziska Ohnsorge, World Bank chief economist for South Asia.

Bangladesh’s strong post-pandemic recovery was disrupted in fiscal 2022-23 (FY23) by rising inflation, financial sector vulnerabilities, external pressure and global economic uncertainty, the World Bank said in its ‘Bangladesh Development Update –New Frontiers in Poverty Reduction’, which was also released.

Reforms to address inflation through monetary and fiscal policies, as well as financial sector vulnerabilities will be critical for the country to sustain growth and poverty reduction, it noted.

A single market-based exchange rate would help attract foreign currency inflows through formal channels and support the balance of payment and reserve accumulation, it suggested.

Supported by economic growth, Bangladesh improved living conditions and reduced extreme poverty to 5 per cent in 2022 from 9 per cent in 2016, which is comparable to Latin America and the Caribbean countries and fares better than the South Asian average.

ALCHEMPro News Desk (DS)