Publication: South Asia Economic Focus, Spring 2019: Exports Wanted
Loading...
Files in English
49,208 downloads
Date
2019-04-07
ISSN
Published
2019-04-07
Author(s)
Editor(s)
Abstract
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.
Link to Data Set
Citation
“World Bank. 2019. South Asia Economic Focus, Spring 2019: Exports Wanted. © World Bank. http://hdl.handle.net/10986/31498 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication South Asia Economic Focus, Spring 2017(World Bank, Washington, DC, 2017-04)South Asia remains the fastest growing region in the world. With a strong performance in the eastern part of the region – in particular in Bhutan, Bangladesh and India – the region defied disappointing world growth in 2016. Inflation slowed down in the second half of 2016, mainly due to lower food prices, but appears to be turning up again. Despite recent real exchange rate appreciation, current account balances are mostly in order throughout the region. After a sharp decline triggered by lower oil prices, remittance inflows are stabilizing in most countries and international reserves are mostly at comfortable levels. Progress on fiscal consolidation has been more gradual and public debt levels remain high. South Asia’s performance will maintain momentum, with the gap between its growth rate and that of East Asia slightly widening over time. Regional growth is expected to surpass 7 percent from 2018 onwards. Robust domestic demand, an uptick in exports, and steady FDI inflows underlie this positive outlook. But with financial sector risks remaining, creating financing opportunities for private investment remains a challenge. Pressures against international trade are mounting. The negotiation of mega-regional trade agreements stalled, the number of protectionist measures has increased, and existing agreements may be reconsidered. South Asia was already less integrated in global merchandise trade than other regions. In light of current pressures, a legitimate question is whether it should focus on exports as a driver of economic growth and job creation. However, the prospects for the region are better than it seems. The stalled mega-regional trade agreements, which did not include any South Asian country, were expected to reduce South Asia’s competitiveness. Simulations on the impact of hypothetical new trade barriers applied across the board suggest that the harm for the region would be limited. And in a scenario where hypothetical new trade barriers would be applied selectively, South Asia could actually benefit from trade diversion. The region also stands to gain from the observed growth recovery in advanced economies, because they are the main markets for its exports. The current globalization backlash should thus not dissuade South Asian countries from having a stronger outward orientation. But the gains for the region would be larger if its exports were more diversified and its supply response were more elastic.Publication South Asia Economic Focus, Spring 2018(Washington, DC: World Bank, 2018-04-15)South Asia is again the fastest growing region in the world. And growth should further strengthen to 7.1 percent on average in 2019-20, reflecting an improvement across most of the region. But are countries generating enough jobs? The demographic transition is swelling the ranks of the working-age population across most of South Asia. For this report, crucial information about employment in South Asia is extracted in a transparent and replicable way from over 60 surveys and censuses covering the period from 2001 onwards. The analysis of this information reveals that employment does respond to economic growth in the short term, implying that growth is not jobless. It also appears that countries in South Asia have created large numbers of jobs over the years. However, the nature of the jobs created is not fully encouraging, and the analysis shows that rapid growth alone will not be sufficient to bring South Asian employment rates to the levels observed elsewhere in the developing world. In addition to high growth, more and better jobs need to be created for every percentage point of growth. The results in this chapter call for better employment data, and for a focus on the economic policies that can boost job creation.Publication South Asia Economic Focus, Fall 2019(Washington, DC: World Bank, 2019-10-13)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 2016(2016-04-10)South Asia by now has consolidated its position as fastest growing developing region in the world. Against the backdrop of relative external stability and some monetary policy space, growth is expected to continue a gradual acceleration on the back of strong investment performance and a return to solid contributions from export growth. India remains the motor of the region and on its way closer to 8 percent real GDP growth, though on a relatively more gradual path than previously anticipated. At the same time, economies across the region will have to tackle fading tailwinds and face ever more binding domestic constraints in the form of persistently high fiscal deficits together with high debt levels as well as some vulnerabilities in the financial sector. The focus section of this report will delve deeper into evaluating the quality of fiscal consolidation and policy, trying to assess short and longer term impact across major South Asian economies.Publication South Asia Economic Focus, Spring 2014 : Time to Refocus(Washington, DC, 2014-04-06)South Asia experienced a strong cyclical rebound in 2013Q3 growth but has since slowed again. The strong regional growth performance between July and September 2013 can be largely attributed to a temporary pick up in export growth, investment activity, as well as stronger agricultural output. Since the large impact of global portfolio rebalancing in May 2103, emerging markets have separated into a diverse group ranging from continuously fragile to resilient vis-a-vis external pressures. India has managed to turn around the wheel and minimize exposure to further tapering in 2014. Weak growth and exchange rate depreciation have characterized India for some time. Capital inflows into South Asia have regained some momentum and proved more resilient in January 2014 as opposed to May 2013. This report presents recent economic developments; outlook and policy; focus: from external to domestic risk; South Asia country briefs for Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka; and South Asia at a glance.
Users also downloaded
Showing related downloaded files
Publication Crops, Conflict and Climate Change(Washington, DC: World Bank, 2025-01-08)This paper studies the welfare impacts of agricultural shocks on households with detailed heterogeneity, by taking consumption, land, and labor allocation choices into account. The underlying model is quantified with household survey data from 51 developing countries, then used to analyze the welfare consequences of the food price hikes induced by the Russian Federation's invasion of Ukraine and future climate change. Both repress income and exacerbate inequality. War-induced food inflation reduced real household incomes across developing countries by 2.90 percent on average, while changes in yields due to climate change will reduce real incomes by 11.99 percent. The welfare impacts of both shocks vary enormously across the income distribution, with already vulnerable households bearing the brunt of their costs. Poor households suffer losses that are considerably larger and much more dispersed than those predicted by models that do not feature household heterogeneity and rely exclusively on aggregate data.Publication South Asia Development Update, October 2024: Women, Jobs, and Growth(Washington, DC: World Bank, 2024-10-10)South Asia’s growth is on track to exceed earlier expectations, in a broad-based upturn. The region is expected to remain the fastest-growing among emerging market and developing economies (EMDEs). Several risks could upend this generally promising outlook, including extreme weather events, social unrest, and policy missteps, such as reform delays. But South Asian countries also have considerable untapped potential that could help them further boost productivity growth and employment and adapt to climate change. In particular, with about two-thirds of the region’s working-age women out of the labor force, raising female employment rates to those of men could increase per capita income by as much as one-half. Measures to accelerate job creation, remove obstacles to women working, and equalize gender rights would be more effective if combined with a shift toward social norms that looked more favorably on working women. Also, most South Asian countries rank among the EMDEs least open to global trade and investment. Greater openness could boost women’s employment, spur the growth of firms, and allow the region to take better advantage of the reshaping of global supply chains and trade. Reducing the cost of conducting business could help the region better harness large-scale remittance inflows.Publication Pakistan Country Climate and Development Report(World Bank, Washington, DC, 2022-11)Integrating climate and development is a pillar of the World Bank Group’s (WBG) Climate Change Action Plan 2021-25. To advance its implementation, the WBG has launched the Country Climate and Development Report (CCDR). This new, core diagnostic tool analyzes how a country’s development goals can be achieved in the context of adapting to, and mitigating against, climate change. As such, the Pakistan CCDR provides analysis and policy recommendations on how to harmonize the country’s efforts to achieve further economic growth and lower poverty rates, on the one hand, with the pursuit of a climate-resilient, low-carbon, and equitable development path, on the other. In light of the devastating 2022 heatwaves and floods and the country’s vulnerability profile, the CCDR puts a strong emphasis on the need for building long-term resilience. Further, it explores pathways for Pakistan to achieve deep decarbonization by 2050, and eventually reach net-zero emissions by 2070 without undermining its development ambitions. It also provides assessment on technical, financial and institutional and governance frameworks needed for these climate transitions. Most importantly, it attempts to capture the centrality of people in climate policies by assessing how climate risks affect lives and livelihoods, and ways in which governments can build resilience and address poverty, distributional and job impact of climate change and climate actions. Lastly, it sheds lights on ways for Pakistan to galvanize cooperation between public and private sectors and support from international communities.Publication Can Duty Drawbacks Have a Protectionist Bias? Evidence from MERCOSUR(World Bank, Washington, DC, 2001-01)Duty drawback (or rebate) systems, reduce or eliminate the duties paid on imported intermediate goods, or raw materials used in the production of exports. When a firm imports an intermediate product for use in the production of an export good, tariff payments on the imported intermediate good are either waived (duty drawback), or returned to the producer once the final product is exported (rebate). These incentive systems are often justified on the grounds that they tend to correct the anti-trade bias imposed by high tariff levels. The problem with this line of reasoning is that it assumes that tariffs are predetermined policy variables; if they were, the easiest way to reduce their anti0trade bias would be to eliminate them. But this is rarely done because existing levels of protection correspond to a political economy equilibrium, difficult to modify in the presence of lobbying pressures. The authors show that in a political economy setting, where tariffs and duty drawbacks are endogenously chosen through industry lobbying, full duty drawbacks are granted to exporters that use imported intermediate goods in their production. This in turn decreases their incentives to counter-lobby against high tariffs on their inputs. Indeed, under a full duty drawback regime, tariffs on intermediate goods are irrelevant to exporters, because they are fully rebated. In equilibrium, higher tariffs will be observed on these goods. Creating a regional trading block, alters the incentives by eliminating duty drawbacks on intra-regional exports, which leads to lower tariffs for goods that intra-regional exporters use as inputs. Evidence from MERCOSUR suggests that eliminating duty drawbacks for intra-regional exports, would lead to increased counter-lobbying against protection of intermediate products. The authors estimate that without this mechanism, the common external tariff would have been 3.5 percentage points (25 percent) higher on average.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.