South Asia Development Update

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The South Asia Development Update, previously known as South Asia Economic Focus, presents the near-term economic outlook for South Asia as well as in-depth analysis on topical challenges and opportunities for policy makers in Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. This series is prepared twice a year by the Office of the Chief Economist for the South Asia region.

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  • Publication
    South Asia Economic Focus, Fall 2019: Making (De)centralization Work
    (Washington, DC: World Bank, 2019-10-13) World Bank
    Global GDP growth is decelerating, while trade and industrial production are stagnating. The slowdown has been severe in South Asia, which in recent quarters was no longer the fastest growing region in the world. In most South Asian countries, growth is expected to be below long-run averages this year but there is significant diversity evident in the high frequency data of industrial production. Current account deficits have declined, as is often the case during economic downturns. Inflation remains near target in most countries, but food price inflation is picking up. Growth forecasts for South Asia are revised downward considerably as uncertainty in global markets and a worsening global outlook have become more important drivers of the forecast. The expected modest recovery to 6.3 percent in 2020 and 6.7 percent in 2021 is tentative as forecasts under current circumstances, particularly for investment, are highly uncertain. In many countries across the region, further decentralization is a high policy priority. These policies are part of a global decentralization trend, which aims to improve local service delivery. Empirical evidence of the effectiveness of decentralization is mixed, a result which is often attributed to partial decentralization. Successful development requires both decentralization and centralization at the same time. In the interplay between central and local governments, the allocation of resources plays a crucial role. In South Asia, a lack of geospatial data on expenditure and development outcomes remains a major constraint.
  • Publication
    South Asia Economic Focus, Spring 2019: Exports Wanted
    (Washington, DC: World Bank, 2019-04-07) World Bank
    South Asia remained the fastest growing region in the world last year, but growth remained driven by domestic demand – and not exports – which resulted in another year of double-digit volume growth of imports. The value of imports was further pushed up by rising oil prices. The widening current account deficits became more difficult to finance and these tensions triggered capital outflows, depreciation pressures, increases in credit default swap spreads, and falling stock prices. In recent months, however, the data shows a more positive picture. The growth outlook for South Asia assumes that the recent acceleration of export growth continues and that import growth slows. Under these conditions, GDP growth is expected to accelerate. Under current circumstances fiscal tightening is appropriate, not only to make government debt more sustainable, but also to bring the economy back into balance, and thus become less vulnerable to deteriorating conditions in international financial markets. Using a gravity model, we show that South Asian countries export only a third of their potential. If countries export closer to potential, not only would short-term adjustments be easier, but also the long-term growth potential would be higher. Closing the export gap is an essential step in addressing both short-term and long-term macroeconomic challenges in South Asia.
  • Publication
    South Asia Economic Focus, Spring 2015: Making the Most of Cheap Oil
    (Washington, DC, 2015-04) World Bank
    The South Asia Economic Focus is a biannual economic update presenting recent economic developments and a near term economic outlook for South Asia. It includes a Focus section presenting more in depth analysis of an economic topic of relevance for stability, growth and prosperity in the region as well as country briefs covering Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. It concludes with a data section providing key economic indicators for South Asia "at a glance". Overall, it aims at providing important background information and timely analysis of key indicators and economic and financial developments of relevance to World Bank Group operations and interaction with counterparts in the region, particularly during annual and spring meeting.
  • Publication
    South Asia Economic Focus, Fall 2013 : A Wake-Up Call
    (Washington, DC, 2013-10-10) World Bank
    Global capital re-balancing has highlighted structural weakness and vulnerability in South Asia, acting as a wake-up call for policy makers. While recent economic developments in advanced countries are encouraging, large parts of the region continue to slow. Portfolio outflows, triggered by the prospect of unwinding Quantitative Easing (QE) in the US, have made current account deficits more difficult to finance across emerging markets. Meanwhile, supply-side constraints and macroeconomic imbalances remain a challenge in most South Asian countries. But the depreciation of regional currencies offers an opportunity to stimulate growth and create space for reforms to improve the investment climate. While the medium term outlook for the region remains cautiously positive, two highly complementary policies are central for needed higher and sustainable growth. First, continuing to tighten the stance of fiscal and monetary policy will help to promote macroeconomic stability and raise tax revenue to reduce vulnerability. Second, removing supply side constraints, both regulatory and physical, will pave the way for increasing investment and growth. Given the recent economic turmoil across emerging market economies, this edition's focus section examines the relationship between the transmission of economic shocks from India to the rest of South Asia, as well as from the world to South Asia. The main findings of the analysis suggest that, independent of global business cycle movements, India plays an important role in influencing growth across the region, and that this effect has increased since the 2008 global crisis. Furthermore, the United States played a larger role in influencing global cyclical real GDP movements before the global crisis, but since then its independent influence has diminished as all regions are moving together with greater frequency. Nonetheless, much of the cyclical real GDP variation in the region remains idiosyncratic.