MPO 04/2025 South Asia MACRO POVERTY OUTLOOK Country-by-country Analysis and Projections for the Developing World © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Afghanistan Maldives Bangladesh Nepal Bhutan Pakistan India Sri Lanka South Asia Macro Poverty Outlook / April 2025 1 This outlook reflects information available as of April 10, 2025. 1 AFGHANISTAN Population Poverty million 42.4 .. 2 3 Life expectancy at birth School enrollment Afghanistan's economy is estimated to have grown by 2.5 years primary (% gross) percent in FY2024, driven by agriculture, construction, and commerce. Aid and remittances supported aggregate de- 62.9 110.0 4 5 mand, but uncertainty over external assistance, a persistent GDP GDP per capita trade deficit, and restrictive laws affecting women pose current US$, billion current US$ significant risks. The outlook remains fragile, requiring policy reforms, improved trade balance, and continued external 20.7 486.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2019. 4/ 2024. 5/ 2024. support for sustainable economic stability and growth. further stifles industrial and commercial activity, slowing econom- Key conditions and challenges ic recovery. Without meaningful reforms, Afghanistan risks pro- longed stagnation, deeper poverty, and continued dependence Afghanistan’s economy remains fragile, with a slow recovery fol- on humanitarian aid. lowing sharp contractions in 2021 and 2022. Foreign aid, once a key driver, has significantly declined since the Interim Taliban Ad- ministration (ITA) took power. While trade with neighboring coun- Recent developments tries and agricultural revival offers some stability, high unem- ployment and low household incomes persist. The banking sec- In FY2024 (through March 21, 2025), Afghanistan’s GDP is esti- tor struggles with liquidity shortages, international restrictions, and mated to have experienced modest growth, driven by agriculture, the shift to Islamic finance, limiting credit access. Although infla- mining, construction, and commerce. On the demand side, pri- tion has eased, food insecurity remains widespread due to climate vate consumption remained the primary growth driver, support- shocks and deficient infrastructure. ed by a modest rebound in investment, particularly in real estate and construction. However, overall demand growth was limited In the medium term, Afghanistan faces structural challenges that by declining exports. hinder sustainable growth. Financial isolation limits foreign in- vestment and access to global markets, while reliance on a cash- Deflationary pressures eased to negative 0.8 percent in January based informal economy creates inefficiencies. Policy uncertainty 2025 year-on-year, from negative 10.2 percent a year earlier as de- and restrictive social measures, particularly on female education mand recovered. Food prices fell 3 percent due to better harvests and workforce participation, weaken human capital and produc- and higher imports, while non-food prices increased 1.3 percent. tivity. Rapid population growth and limited job opportunities con- Core inflation turned positive at 2 percent, indicating modest de- tribute to persistent poverty, vulnerability, and expanding infor- mand growth. On average, domestic prices declined 4.3 percent in mal employment. Deficient energy and transport infrastructure 2024 from the previous year. FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Exports, imports, and investment GDP growth Percent, percentage points Percent of GDP 5 60 0 50 -5 40 -10 30 -15 20 -20 10 -25 2020 2021 2022 2023 2024 2025 2026 2027 0 Agriculture Industry 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Services Net taxes on production Real GDP Investment Exports of GNFS Imports of GNFS Sources: World Bank and National Statistics and Information Authority. Source: World Bank. 2 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. On the labor market, wages of both skilled and unskilled workers 31.2 percent of GDP. On-budget operating expenditures are es- continue to grow in both nominal and real terms despite high levels timated to have reached 16.6 percent of GDP, with higher de- of unemployment, possibly indicating human capital constraints velopment spending (from 0.2 pp of GDP in FY2023 to 1.5 pp and geographic mismatch between supply and demand. Restric- of GDP in FY2024). tive policies affecting women’s education, employment and phys- ical mobility exacerbate existing labor market challenges. The un- employment rate doubled between 2020 and 2023, with women Outlook and youth being the most affected. Afghanistan’s economic growth is expected to slow to 2.2 percent International assistance, remittances, and deflationary trends in 2025 due to aid disruptions before recovering to 2.5 percent in contributed to stabilizing poverty rates at around 48 percent as 2026-27, assuming no additional external shocks. Agriculture will of Spring 2023, a 4-percentage point decline compared to the remain the key growth driver, outpacing other sectors. However, same period in 2020. High levels of poverty are compounded by given sustained population growth, per capita GDP is expected to widespread vulnerability to shocks. Poverty in urban areas re- remain stagnant and insufficient to sustain poverty reduction. Eco- mains on an upward trend, reflecting the lack of economic op- nomic vulnerability, driven by external shocks and exacerbated by portunities. In rural areas, improvement in the security situation declines in aid, remains a major concern. and better access to markets supported a decline in poverty, which, however, remains vulnerable to volatile agriculture sector Afghanistan’s current account deficit is projected to widen to outcomes and shocks. 26.3 percent of GDP over the next three years, up from 24.6 percent in FY2024, driven by a 46.6 percent trade deficit. Afghanistan’s current account deficit is estimated to have The fiscal deficit is expected to remain around 2 percent of widened to 24.6 percent of GDP in FY2024, up from 17.6 percent GDP from FY2025 to FY2027, with revenue collection remaining in FY2023, driven by a 1.4 percentage-point (pp) of GDP increase slightly below 17 percent of GDP as the ITA seeks to offset de- in the trade deficit and a 5.6 pp decline in net income. The trade clining aid. However, borrowing constraints mean any revenue deficit grew due to a stronger Afghani (local currency), tariff hike increases will likely be matched by rising expenditures, limiting and temporary border closures with Pakistan. Declining net in- fiscal flexibility. come stemmed from reduced foreign aid. Undisclosed financial flows have contributed to financing the current account deficit, Afghanistan’s economic outlook remains bleak, with risks tilted to given the limited foreign direct investment (FDI) and the absence the downside, primarily due to aid uncertainty. The humanitari- of external borrowing capacity. an situation is even more precarious. According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), nearly half Domestic revenue rose by 1.4 percentage points to 16.9 percent of of the population will require aid in 2025 as the country strug- GDP in FY2024, partially offsetting a 4 pp decline in external grants gles to meet both chronic and acute needs. Further aid declines to 14.3 percent of GDP. The fiscal deficit (cash basis) is projected would weaken economic activity, deepen fiscal challenges, and to increase to 2.1 percent of GDP, with total expenditures at strain the external sector. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -6.2 2.3 2.5 2.2 2.4 2.5 Private consumption 0.6 6.4 4.9 3.2 2.9 2.8 Government consumption -1.2 0.7 9.1 2.3 1.8 2.6 Gross fixed capital investment 29.2 -5.7 3.0 2.0 2.0 2.0 Exports, goods and services 18.6 -12.1 -3.0 2.5 2.0 2.0 Imports, goods and services 36.7 0.7 8.0 4.0 2.8 2.8 Real GDP growth, at constant factor prices -6.4 1.8 2.5 2.2 2.4 2.5 Agriculture -6.6 2.2 6.0 3.2 3.2 3.2 Industry -5.7 1.8 2.1 2.5 2.5 2.5 Services -6.5 1.5 -0.3 1.2 1.6 1.8 Inflation (consumer price index) 10.6 -7.7 -4.3 2.0 3.0 4.0 Current account balance (% of GDP) -18.8 -17.6 -24.6 -26.4 -26.4 -27.3 Net foreign direct investment inflow (% of GDP) 0.0 0.3 0.0 0.0 0.0 0.0 Fiscal balance (% of GDP) -1.0 -1.2 -2.1 -2.2 -2.2 -2.3 Revenues (% of GDP) 40.6 33.9 31.2 28.9 27.9 26.9 Debt (% of GDP) 13.9 13.6 13.8 14.4 14.9 14.9 Primary balance (% of GDP) -1.0 -1.2 -2.1 -2.2 -2.2 -2.3 GHG emissions growth (mtCO2e) 2.1 2.4 2.8 3.0 2.9 2.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 3 This outlook reflects information available as of April 10, 2025. 1 2 BANGLADESH Population Poverty million millions living on less than $3.65/day 173.4 50.9 3 4 Life expectancy at birth School enrollment Real GDP growth is expected to slow from 4.2 percent in years primary (% gross) FY24 to 3.3 percent in FY25, driven by declining investment amidst political uncertainty. Extreme poverty is projected 73.7 111.6 5 6 to rise from 7.7 percent in FY24 to 9.3 percent in FY25, GDP GDP per capita with inequality increasing by almost one Gini index point. current US$, billion current US$ The trade disruptions due to global trade policy uncertain- ty is expected to impact exports, investments and growth 450.4 2598.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. in the medium term. 4/ 2023. 5/ 2024. 6/ 2024. diversify exports, boost the quality of human capital, and Key conditions and challenges address climate risks. Bangladesh's economy continues to encounter challenges, includ- ing elevated inflation and vulnerabilities within the financial sec- Recent developments tor. Domestic political and global trade policy uncertainty could further hamper investment, exports, and growth prospects. How- Real GDP growth declined to 4.2 percent in FY24 from 5.8 percent ever, some external sector pressures have eased, as evidenced in FY23, primarily driven by a 17.1 percent decline in exports. On by narrowing balance of payment (BoP) deficits and stabilizing the production side, the slowdown was attributed to the industri- foreign exchange (FX) reserves. al sector, where growth moderated to 3.5 percent in FY24 from 8.4 percent in FY23. Economic activity further decelerated in the Labor market conditions worsened as labor force participation fell first half of FY25, as evidenced by a slowdown in revenue col- from 60.9 percent in 2023 to 59.2 percent in 2024, mainly due to lection, a decline in private sector credit growth and imports of declining female participation. The employment ratio dropped by capital goods, and rising non-performing loans (NPLs) from 9 per- 2.0 percentage points, while the unemployment rate rose slightly cent in January 2024 to 17 percent in FY25Q1 to 12.5 percent in to 3.6 percent, largely driven by discouraged workers exiting the FY24Q4. Despite inflationary pressures, remittances continued to market. All sectors experienced job losses, with services hit hard- support private consumption growth. est at 2.6 percent. Inflation remained elevated at 9.3 percent in February 2025 due Comprehensive reforms to create more and better jobs, im- to exchange rate depreciation and supply-side challenges. The prove the business environment, and revenue mobilization policy rate was raised by 150 basis points in FY25 to 10 per- will be critical to supporting growth. In the medium term, cent. High inflation and job losses have strained welfare, espe- Bangladesh will need to improve governance and transparency, cially for low-income households. In the first half of FY25, nearly FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 100 250000 90 10 80 200000 70 5 60 150000 0 50 40 100000 -5 30 20 50000 -10 10 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Bangladesh Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 4 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 4 percent of workers lost jobs, with wages falling by 2 percent for The BoP balance is expected to improve in FY25, as robust remit- low-skilled and 0.5 percent for high-skilled workers. As a result, ex- tance inflow narrows the CAD. The financial account is expected treme poverty at the US$2.15 (2017 PPP) threshold is expected to to be supported by budget support from the development part- rise by 2.2 percentage points and inequality by less than half a Gini ners. As a result, FX reserves are expected to stabilize in FY25. In point. With over a million people leaving the country annually, re- the medium term, a decline in exports due to trade policy shifts mittance-receiving households are likely to remain more resilient will be partly offset by lower imports because of lower commodity amid the economic challenges. prices. Overall BoP balance is expected to remain stable, support- ing a gradual increase in FX reserves. The current account deficit (CAD) turned into a surplus of US$33 million in the first half of FY25 from a deficit of US$3.5 billion in The growth slowdown in FY25 will disproportionately affect vulner- the first half of FY24, as remittances and exports grew by 27.6 per- able populations. Extreme poverty is expected to rise to 9.3 per- cent and 11.0 percent, respectively. The financial account was sup- cent, pushing 3 million more people into poverty. Inequality is pro- ported by the disbursement of budget support by the development jected to worsen by almost one Gini point, partially offset by re- partners. Improvement in the overall BoP helped FX reserves to re- mittance-receiving households. Additionally, 3 in 5 households are main stable at US$20.4 billion as of March 2025 (3.0 months of im- likely to experience greater financial stress by depleting savings in port coverage). In the fiscal sector, revenue and capital expenditure response to the shock. growth slowed in the first half of FY25. The fiscal deficit is projected to widen to 4.4 percent of GDP in FY25 due to slow revenue collection. Although capital expenditure is ex- Outlook pected to decline, this will be offset by rising current expenditure driven by rising subsidies and interest payments. In the medium Real GDP growth is projected to moderate to 3.3 percent in term, the fiscal deficit is expected to remain within 5 percent of GDP. FY25 due to declining private and public investments growth. Policy uncertainty and rising borrowing and input costs are Downside risks to the outlook have increased substantially. In- expected to contract private investment growth and keep in- creased political instability ahead of the election, international dustrial growth subdued. Public investment will decline as the trade disruptions due to policy uncertainty, weak implementation government reduces the capital expenditure in FY25. However, of envisioned reforms, persistent inflation, energy shortages in the the real GDP is expected to rise gradually in the medium term, peak season, and further weakening of the banking sector could driven by critical reforms. weigh on economic activities. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f 1 Real GDP growth, at constant market prices 7.1 5.8 4.2 3.3 4.9 5.7 Private consumption 7.5 2.0 6.0 5.5 5.7 6.3 Government consumption 6.2 8.5 9.8 1.4 4.2 3.1 Gross fixed capital investment 11.7 2.2 3.3 -2.4 4.5 5.5 Exports, goods and services 29.4 8.0 -17.1 14.5 4.2 7.1 Imports, goods and services 31.2 -9.8 -4.6 7.0 6.7 7.4 1 Real GDP growth, at constant factor prices 7.2 6.2 4.3 3.3 4.9 5.7 Agriculture 3.1 3.4 3.3 3.2 3.0 3.3 Industry 9.9 8.4 3.5 1.9 3.9 5.1 Services 6.3 5.4 5.1 4.3 6.0 6.6 Inflation (consumer price index) 6.1 9.0 9.7 10.0 7.7 5.8 Current account balance (% of GDP) -4.0 -2.7 -1.5 -0.5 -0.8 -1.0 Net foreign direct investment inflow (% of GDP) 0.4 0.4 0.4 0.2 0.3 0.3 Fiscal balance (% of GDP) -4.6 -4.6 -3.9 -4.4 -4.5 -4.6 Revenues (% of GDP) 8.5 8.2 8.3 7.9 8.2 8.3 Debt (% of GDP) 33.8 37.0 36.6 37.8 39.5 41.2 Primary balance (% of GDP) -2.7 -2.6 -1.7 -2.2 -2.3 -2.4 2,3 International poverty rate ($2.15 in 2017 PPP) 5.0 5.5 7.7 9.3 7.1 5.8 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 30.0 30.7 31.3 34.0 31.7 29.9 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 74.1 74.1 73.5 75.2 73.8 72.8 GHG emissions growth (mtCO2e) 5.1 2.7 1.2 3.1 7.9 11.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ FY23 estimates based on BBS provisional estimates. 2/ Calculations based on SAR-POV harmonization, using 2022-HIES. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 5 This outlook reflects information available as of April 10, 2025. 1 2 BHUTAN Population Poverty thousand thousands living on less than $3.65/ day 791.5 3.7 3 4 Economic growth remained robust at 4.9 percent in FY23/24 Life expectancy at birth School enrollment years primary (% gross) and is projected to increase to 6.6 percent in FY24/25 with new hydropower plants. In FY24/25, the fiscal deficit is ex- 72.2 106.1 pected to widen to 5.6 percent of GDP, and the current ac- 5 6 count deficit is expected to improve with higher hydropower, GDP GDP per capita current US$, billion current US$ mining, and forestry exports, and lower cryptocurrency min- ing equipment imports. Despite significant poverty reduc- 3.1 3968.6 tion, 19 percent of Bhutanese remain vulnerable to poverty. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. climate vulnerability and spatial inequalities remained. Poverty Key conditions and challenges rates range from 1.5 percent in Thimphu to 41.4 percent in Zhemgang, with 87 percent of the poor living in rural areas. 60 Increased emigration, especially of skilled workers, after the percent of employment in rural areas remains in low-productive COVID-19 pandemic has prompted the Bhutanese government to agriculture, with high vulnerability to climate change. prioritize private sector development and job creation under the 13th Five Year Plan (FYP), launched in July 2024. Hydropower sector Domestic risks include delays in hydropower projects, persistent is the main driver of economic growth but employs less than one fiscal deficits, and materialization of financial sector contingent li- percent of the labor force. The national unemployment rate abilities. External risks include volatile commodity prices due to dropped to 3.1 percent in Q4 of 2024 but remains high among geopolitical tensions, natural disasters, and climate-related haz- youth and those with higher secondary and bachelor’s degrees, es- ards, affecting livelihoods and infrastructure. The direct and indi- pecially women, and is a major factor driving emigration. Despite a rect impacts of recent global trade uncertainties are likely to be moderation in emigration in 2024, around 9 percent of Bhutanese negligible, as trade with US is limited and 80 percent of Bhutan’s still live abroad. The country faces persistent fiscal deficits partly trade exposure is with India. Sustained high levels of emigration of due to low spending efficacy and low tax revenue. International re- skilled workers may hinder medium-term growth. Cryptocurrency serves have remained low, and the current account deficit (CAD) operations and the Gelephu Mindfulness City project entail signifi- has been elevated since FY21/22 due to increased imports to fi- cant upside and also downside risks. nance the investment in cryptocurrency mining. Economic growth and remittances helped reduce poverty during Recent developments 2017-2022, nearly eradicating extreme poverty ($2.15/day). The number of people living below $3.65/day and $6.85/day also Real GDP grew by 4.9 percent in FY23/24 (July 2023 to June 2024), dropped significantly. While education and sanitation improved, supported by a 6.8 percent growth in the services sector, led by FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percent change Poverty rate (%) Real GDP per capita (constant LCU) 15 50 350000 3.7 6.2 4.8 7.5 7.6 45 10 3.3 5.0 6.6 300000 5.9 4.6 4.9 5.4 40 5 3.5 35 250000 30 200000 0 25 -5 20 150000 -3.3 -2.5 15 100000 -10 10 50000 5 0 0 Private consumption Public consumption 2012 2014 2016 2018 2020 2022 2024 2026 GFCF Export International poverty rate Lower middle-income pov. rate Import GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Statistics Bureau (NSB) and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 6 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. tourism-related services, financing, insurance, and real estate. The quarrying) and tourism. On the demand side, growth is supported agriculture sector grew modestly at 1.5 percent due to lower crop by exports and 13th FYP-related public investments. Medium-term yields caused by increasing vulnerability to climate change, shifts in growth will be driven by robust electricity production, construction land use, and wildlife-related crop damage. Industry growth at 3.0 of the Dorjilung hydropower plant, and mining and quarrying on percent was supported by strong growth in mining and quarrying the supply side and growth of exports and public investment on (base metals and ferro-silicon). Demand side growth was driven by the demand side. The lifting of housing construction loan morato- non-hydropower exports and consumption. Headline inflation de- rium and launching of the collateral-free concessional credit line in celerated from 4.6 to 4.3 percent, due to lower non-food inflation. FY24/25, which has a sluggish start, are expected to pick up and boost investment. The fiscal deficit narrowed to 0.2 percent of GDP in FY23/24, down from 4.7 percent of GDP in FY22/23, driven by Increased domestic Poverty reduction is expected to continue, with the $6.85/day poverty revenue from higher tax collection and increased transfers from rate falling to 6.0 percent in FY24/25 and 5.0 percent in FY25/26. How- state-owned enterprises and the central bank. Also, capital expen- ever, 19 percent of the population remain vulnerable to poverty diture remained low in FY23/24, as most of the capital spending of due to climate hazards, with nearly half of the poor exposed to the 12th FYP was frontloaded in FY20/21 to support pandemic re- landslides (Bhutan Poverty and Equity Assessment, forthcoming). covery. As a result, fiscal deficits narrowed despite increased cur- rent expenditures due to a major salary hike for public servants Fiscal deficits are expected to widen to 5.6 percent and 7.2 percent ranging from 55 to 74 percent, aimed at curbing the high attrition in FY24/25 and FY25/26 due to high capital expenditure during the rate of public servants. 13th FYP implementation phase. One-off profit transfers from com- missioning of Puna II in FY25/26 and disbursement over the 13th The CAD remained elevated at 22.1 percent of GDP in FY23/24, FYP of the BTN 100 billion (US$1.2 billion) grant from the Indian although this is a decline from 34 percent in FY22/23 due to a government will boost revenue. Primary non-wage recurrent ex- reduction in cryptocurrency related equipment imports and im- penditure is expected to remain moderate. Public debt is expected proved tourism exports. Hydropower exports declined despite the to rise to 128 percent of GDP in FY25/26 but is considered sustain- commissioning of the Nikachhu hydropower plant, as domestic en- able as most of it is hydropower-related. However, rising debt ser- ergy demand from cryptocurrency mining operations increased. vice may limit the fiscal space for spending on social programs. Gross international reserves increased modestly to US$624 million in June 2024 (4.9 months of FY23/24 total imports). The CAD is projected to decline to 17.6 and 9.2 percent of GDP in FY24/25 and FY25/26, before moderating further in the medium term due to continued decline in cryptocurrency mining related Outlook equipment imports. Export is projected to grow with higher hy- dropower exports from the commissioning of Puna-II, increased Real GDP growth is projected to rise to 6.6 percent in FY24/25, non-hydropower (mining and forestry), and tourism exports. As a led by commissioning of Puna-II hydropower plant, and growth result, international reserves are projected to increase to US$643 in the non-hydropower industries (construction, mining, and million in June 2025 (4.7 months of FY24/25 total imports). Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices 4.8 5.0 4.9 6.6 7.6 5.3 Private consumption 1.8 6.8 1.8 2.2 2.3 2.2 Government consumption 1.9 -0.5 5.8 4.5 -0.9 -0.9 Gross fixed capital investment 25.4 5.6 -2.6 5.7 9.0 11.0 Exports, goods and services -4.1 9.8 8.6 6.2 16.7 2.6 Imports, goods and services 13.2 7.5 -3.7 -0.4 5.4 3.6 Real GDP growth, at constant factor prices 4.9 4.8 4.9 6.6 7.6 5.3 Agriculture 0.1 0.1 1.5 2.8 3.9 3.7 Industry 4.8 2.7 3.0 9.4 13.7 9.3 Services 6.3 7.4 6.8 5.9 4.8 3.2 Inflation (consumer price index) 5.9 4.6 4.3 4.4 4.1 3.9 Current account balance (% of GDP) -28.1 -34.0 -22.1 -17.6 -9.2 -6.1 Fiscal balance (% of GDP) -7.0 -4.7 -0.2 -5.6 -7.2 -3.4 Revenues (% of GDP) 25.1 25.2 26.9 26.1 26.8 28.6 Debt (% of GDP) 118.8 116.1 109.2 109.1 127.7 129.1 Primary balance (% of GDP) -6.8 -4.1 0.6 -3.8 -5.7 -1.8 1,2 International poverty rate ($2.15 in 2017 PPP) 0.0 .. .. .. .. .. 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.5 0.4 0.3 0.3 0.2 0.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 8.4 7.7 7.0 6.0 5.0 4.4 GHG emissions growth (mtCO2e) -1.6 -1.7 -1.6 -1.6 -1.6 -1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2022-BLSS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 7 This outlook reflects information available as of April 10, 2025. 1 2 INDIA Population Poverty million millions living on less than $3.65/day 1450.9 400.8 3 4 Life expectancy at birth School enrollment Growth is estimated to have slowed to 6.5 percent in FY25 years primary (% gross) (2024-25). Services growth was steady, agriculture activity accelerated, but industrial growth slowed. On the demand 67.7 112.0 5 6 side, growth was held back by lackluster investment. Poverty GDP GDP per capita at the lower-middle income country line fell from 61.8 to current US$, billion current US$ 28.1 percent between 2011-12 and 2022-23 (2017 PPP). Amid heightened global uncertainty, growth is projected to 3897.2 2686.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. reach 6.3 percent in FY26. 4/ 2023. 5/ 2024. 6/ 2024. between 2017 and 2021, a revised extreme poverty line of $3.00 Key conditions and challenges would constitute a 15 percent higher threshold than $2.15 ex- pressed in 2021 prices and result in a 5.3 percent poverty rate Between 2000 and 2023, India’s economy expanded nearly fourfold in 2022-23. A new LMIC line of $4.20 would imply a 5 percent in real terms. Rapid growth was driven by capital deepening and to- lower threshold for poverty than $3.65 adjusted in 2021 prices tal factor productivity, while labor accumulation contributed mar- and yield a poverty rate of 23.9 percent. ginally. Improvements in the business environment and greater participation in global trade characterized this period. While the The labor market is characterized by low female labor force par- COVID shock triggered a steep growth contraction in FY21 (-5.8 ticipation (35.6 percent in 2023, compared to 47 percent for percent), growth rebounded rapidly in FY22 (9.7 percent) and re- middle-income countries), high unemployment among tertiary- mained strong over the subsequent period (averaging 7.8 percent educated youth (29 percent), and high prevalence of unpaid between FY23 and FY25). As of FY25, real GDP was around 5 per- work (16.5 percent of jobs), despite a notable increase in female cent below the pre-pandemic trend level. worker-to-population ratio from 19.2 to 33.8 percent between 2017-18 and 2023-24. The extreme poverty rate decreased from 16.2 to 2.3 percent be- tween 2011-12 and 2022-23, while the poverty rate at the lower- middle income country (LMIC) line declined by 33.7 percentage Recent developments points (table footnote 2/). Free and subsidized food transfers sup- ported poverty reduction, and the rural-urban poverty gap nar- Growth is estimated to have slowed from 9.2 percent in FY24 rowed. The five most populous states account for 54 percent to 6.5 percent in FY25. Agricultural activity rebounded and con- of the extremely poor. Poverty estimates will change with 2021 struction and services growth remained stable. However, indus- PPPs and new international poverty lines based on an updated trial expansion decelerated. On the demand side, private con- reference set of national poverty lines. Given India’s inflation rate sumption growth accelerated thanks to increasing real wages FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual poverty rates and real private consumption per at factor cost capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant million LCU) 12 70 180000 Forecast 60 160000 9 140000 6 50 120000 3 40 100000 30 80000 0 60000 20 -3 40000 10 -6 20000 0 0 2011 2013 2015 2017 2019 2021 International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP at factor cost Real priv. cons. pc Sources: National Statistics Office (NSO) and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. Note: FY18/19 refers to the fiscal year 2018-19 (April 2018-March 2019) and so on. 8 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and the positive rural outlook, but investment growth decelerat- ed owing to delays in public infrastructure spending and weak Outlook private investment. Growth is expected to reach 6.3 percent in FY26, lower than pre- Since 2021-22, employment has grown faster than the working- viously anticipated. This delayed recovery toward potential reflects age population (table footnote 1/). Recent data indicate a reversal heightened global uncertainty and its expected negative impact on of pandemic era urban-to-rural migration, with rural male workers domestic investment and global growth. On the one hand, private moving back to urban areas for work, while rural female employ- consumption should benefit from easing inflation (further support- ment in agriculture increased. ed by lower commodity prices), recent income tax cuts, and good agricultural prospects. However, overall investment growth is likely Headline inflation fell to 3.6 percent y-o-y in February 2025, thanks to be held back by elevated uncertainty. Shifts in trade policy and to lower food and fuel prices. With this additional headroom and the anticipated global economic slowdown are also expected to re- below-potential growth, the RBI’s Monetary Policy Committee re- duce external demand for India’s goods and services. duced the policy rate twice by 25 basis points, to 6.25 percent in February 2025 and 6.0 percent in April. Headline inflation is projected to converge to the RBI’s target of 4 percent over the medium term, mainly thanks to slower growth in The general government’s fiscal deficit is estimated to have nar- food prices and benign commodity prices. The overall fiscal deficit rowed to 7.6 percent of GDP in FY25, from 8.4 percent in FY24. This is projected to decline gradually, with robust revenue growth, con- was mainly thanks to consolidation at the central level, driven by tinued consolidation in current spending, and capital spending sta- strong tax revenue growth and a decline in current expenditure as bilizing as a share of GDP. The public debt-to-GDP ratio is expected a share of GDP. As a result, public debt is estimated to have de- to fall below 80 percent by FY28. The current account deficit is ex- clined from 81.8 percent of GDP in FY24 to 81.2 percent in FY25. pected to average around 1.2 percent of GDP over FY26-28 and re- The current account deficit remained stable at 0.7 percent of GDP main adequately financed by capital inflows. Foreign exchange re- in FY25. A modest widening of the merchandise trade deficit was serves are projected to remain stable at around 16 percent of GDP. offset by buoyant services exports. Net FDI increased to around 1 percent of GDP in FY25, while net foreign portfolio investment Growth should gradually converge back to potential over FY27-28 declined to 0.2 percent of GDP (from 1.2 percent in FY24) as port- assuming the current global uncertainties are resolved in an or- folios were rebalanced toward China and the US. As a result, for- derly fashion. The outlook, however, is subject to significant down- eign exchange reserves fell from US$ 646.4 billion at end-FY24 side risks, as policy shifts may continue to unfold globally. Elevated to US$ 638.6 billion in February 2025 (remaining at around 11 trade tensions would dampen demand for India’s exports and fur- months of import cover). ther delay the recovery in investment. Recent history and projections 2022/23 2023/24 2024/25e 2025/26f 2026/27f 2027/28f Real GDP growth, at constant market prices 7.6 9.2 6.5 6.3 6.5 6.7 Private consumption 7.5 5.6 7.6 7.1 7.0 7.0 Government consumption 4.3 8.1 2.4 6.2 5.7 6.0 Gross fixed capital investment 8.4 8.8 6.5 6.6 6.8 6.8 Exports, goods and services 10.3 2.2 7.1 6.0 6.5 7.1 Imports, goods and services 8.9 13.8 -1.1 8.3 7.5 7.5 Real GDP growth, at constant factor prices 7.2 8.6 6.4 6.3 6.5 6.7 Agriculture 6.3 2.7 4.6 3.9 3.5 3.5 Industry 2.5 10.8 5.6 5.4 5.8 6.1 Services 10.3 9.0 7.3 7.5 7.7 7.8 1 Employment rate (% of working-age population, 15 years+) 51.8 53.6 53.5 53.4 53.4 53.4 Inflation (consumer price index) 6.7 5.4 4.5 4.1 4.0 4.0 Current account balance (% of GDP) -2.0 -0.7 -0.7 -1.1 -1.2 -1.2 Net foreign direct investment inflow (% of GDP) 0.8 0.3 0.3 0.5 1.0 1.2 Fiscal balance (% of GDP) -9.6 -8.4 -7.6 -7.2 -7.0 -6.9 Revenues (% of GDP) 21.5 21.4 22.0 21.9 22.1 22.0 Debt (% of GDP) 82.7 81.8 82.0 81.3 80.4 79.4 Primary balance (% of GDP) -4.4 -3.2 -2.3 -1.9 -1.7 -1.6 2 International poverty rate ($2.15 in 2017 PPP) 2.3 .. .. .. .. .. 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 28.1 .. .. .. .. .. GHG emissions growth (mtCO2e) 4.1 3.3 2.7 3.2 2.9 3.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ These estimates are based on the current weekly activity status in the Periodic Labour Force Surveys until 2023-24. The current weekly status (7-day recall) is aligned with ILO rec- ommendations. 2/ Calculations based on the2011-12 Consumption Expenditure Survey (CES) and the 2022-23 Household Consumption Expenditure Survey (HCES), using the modified mixed reference period and a spatially and intertemporally deflated welfare aggregate. The estimates in this brief will change due to a revision of international poverty lines and the adoption of 2021 PPPs. Macro Poverty Outlook / April 2025 9 This outlook reflects information available as of April 10, 2025. 1 2 MALDIVES Population Poverty thousand thousands living on less than $6.85/ day 527.8 18.9 3 4 Economic growth is expected to remain positive over the Life expectancy at birth School enrollment years primary (% gross) medium term driven by tourism. Substantial fiscal and exter- nal imbalances continue to present rising liquidity and sol- 80.8 97.5 vency concerns. Maintaining economic stability requires sig- 5 6 nificant fiscal consolidation, while protecting the poor and GDP GDP per capita current US$, billion current US$ vulnerable from declining welfare. The forecast is subject to heightened downside risks due to global trade uncertainties. 7.0 13292.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. capital spending, reforming state-owned enterprises and reducing Key conditions and challenges rising public health spending. Delay in implementation of these re- forms has led to increase in fiscal and external deficits, elevated Tourism represents about 21 percent of GDP directly and contin- public debt and declining foreign exchange reserves. This has also ues to bolster economic activity. Tourist arrivals have increased raised concerns regarding the financial health of certain sectors in significantly in recent years, with China, Russia, and Western Eu- the real economy. rope the leading markets. Spending per tourist has been moder- ating. Domestic employment sources are vulnerable to economic and fiscal shocks: 40 percent of employment is informal, gender Recent developments gaps are persistent, and formal sector employment is dominat- ed by the public sector. Only a third of resort island employees Tourist arrivals increased by 8.9 percent (y-o-y) and reached an are Maldivian. all-time high of 2.05 million in 2024. Real GDP is estimated to have grown by 5.5 percent (y-o-y) in 2024 due to robust perfor- Substantial increases in government spending, including for mance in tourism and related services, bringing poverty back be- subsidies and capital expenditures, and a reliance on non-con- low pre-pandemic levels. cessional borrowing in the last decade have led to heightened fiscal and external vulnerabilities. High levels of subsidies have, Overall headline inflation remained low at 1.4 precent (y-o-y) in nevertheless, contributed notably to supporting the budgets of 2024 reflecting the continued provision of subsidies on a wide vulnerable households. range of food and non-food items. Inflation has, however, picked up in recent months – to 4.1 and 4.8 percent (y-o-y) in November The government announced a homegrown fiscal adjustment re- and December—driven by a rapid increase in tobacco, restaurant form agenda in early 2024, focused on reducing non-targeted sub- and accommodation prices. Food price inflation has also been el- sidies and replacing these with targeted transfers, rationalizing evated, reaching an average of 6.6 percent (y-o-y) in 2024, posing FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 12 60 250000 10 8 50 200000 6 40 4 150000 2 30 0 100000 -2 20 -4 50000 2022Q3 2023Q1 2023Q3 2024Q1 2024Q3 10 Agri. and Fish. Manufacturing Electricity and water Construction 0 0 Wholesale and retail trade Tourism 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Transp. and comm. Others International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 10 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. concerns as poor and vulnerable households spend more than a This baseline outlook assumes limited fiscal expenditure reduction. third of their budget on food. As a result, the fiscal deficit is expected to remain elevated and only slowly narrow to 9.8 percent of GDP in 2027 assuming come back- Driven by a 50 percent (y-o-y) decline in fish exports and 4.0 per- loaded consolidation measures kick-in. With high fiscal deficits and cent (y-o-y) growth in goods imports, the trade deficit widened moderation in GDP growth over the medium term, public debt is from US$3.1 billion in 2023 to US$3.3 billion in 2024. High import projected to rise to 135.7 percent of GDP in 2027. costs and external debt repayments have put significant pressure on official reserves, which fell to US$371.2 million in September Given the assumption of limited fiscal adjustment, imports are 2024 (0.8 months of imports). Reserves subsequently recovered to expected to remain elevated. As a result, the current account US$832.1 million (1.7 months of imports) in February 2025, with deficit is expected to remain elevated and decline marginally to the support of a US$400 million currency swap agreement signed 18.4 percent of GDP in 2027. High external financing require- with the Reserve Bank of India, and new FX regulations for the ments—including rising debt servicing obligations in 2025 and tourism sector. Despite recovery in official reserves, the coverage 2026—are expected to put further pressure on official reserves of usable reserves—compared to short-term essential imports and and jeopardize macroeconomic stability. external debt service needs—remains low at less than one month. Risks to the outlook are significantly on the downside. Heightened The fiscal deficit is estimated to have widened to 12.3 percent of global trade uncertainties and potential global economic slowdown GDP in 2024 from 10.6 percent of GDP in 2023, as recurrent expen- may lead to a shock to tourism and harm the growth outlook, diture growth outpaced tepid revenue collection. Due to delays in which would limit the scope for redistribution. Limited domestic subsidy reforms and rising spending on health and wages, total ex- and external financing may further worsen the liquidity and sol- penditure is estimated to have grown by 6.4 percent (y-o-y) in 2024. vency situation, especially with the approaching spike in external Capital expenditure fell by 7.8 percent (y-o-y) in the first three quar- debt repayments. These risks could affect households through re- ters. Revenues grew slowly at an estimated 1.0 percent (y-o-y) in duced purchasing power, limited access to essential imports, and 2024, primarily due to the decline in non-tax revenues. fewer economic opportunities. Unmitigated budget cuts may im- pact public employment. Rising production costs could reduce la- bor demand and incomes, especially in the construction sector, in- Outlook creasing poverty and vulnerability. Limited local food production may also heighten food insecurity. On the upside, a decline in glob- The completion of the new terminal at Velana International Air- al commodity prices could help ease pressures on the current ac- port is expected to support increased tourist arrivals, leading to count and inflation. An immediate and sizeable fiscal adjustment, a projected economic growth of 5.2 percent on average over the which includes targeted mitigation measures to lessen the impact medium term. on household welfare, remains the key priority. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 13.8 4.7 5.5 5.7 5.3 4.7 Real GDP growth, at constant factor prices 14.3 4.6 5.5 5.7 5.3 4.7 Agriculture 6.2 3.2 -19.3 3.7 3.3 3.1 Industry 19.6 3.3 0.1 3.2 3.5 4.3 Services 14.3 4.8 7.6 6.0 5.6 4.8 Inflation (consumer price index) 2.3 2.9 1.4 4.3 3.8 2.0 Current account balance (% of GDP) -16.9 -21.2 -20.5 -20.1 -18.9 -18.4 Net foreign direct investment inflow (% of GDP) 11.9 11.6 11.5 11.2 10.8 10.6 Fiscal balance (% of GDP) -8.9 -10.6 -12.3 -11.8 -10.9 -9.8 Revenues (% of GDP) 30.5 33.7 31.9 33.4 33.4 32.5 Debt (% of GDP) 112.6 124.2 134.2 131.0 132.9 135.7 1 Primary balance (% of GDP) -5.3 -6.5 -7.5 -6.8 -6.1 -4.9 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 2.7 2.5 2.2 .. .. .. GHG emissions growth (mtCO2e) 13.2 9.0 6.6 6.5 6.5 6.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The primary balance excludes interest payments received. 2/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts from 2025 to 2027 are not available for Maldives given uncertainty on the poverty outlook. Poverty estimates are based on the international poverty line for upper-middle-income countries (UMIC) set at $6.85 per person per day, in 2017 PPP. The upcoming shift to 2021 PPPs will be accompanied by a revision of the UMIC line and poverty rates will change accordingly. Macro Poverty Outlook / April 2025 11 This outlook reflects information available as of April 10, 2025. 1 2 NEPAL Population Poverty million millions living on less than $3.65/day 29.7 2.2 3 4 Life expectancy at birth School enrollment Growth is projected to increase in FY25, driven by domestic years primary (% gross) trade, as well as higher electricity and paddy production. Poverty is expected to decline, although a significant share 70.5 123.0 5 6 of the population remains vulnerable. The fiscal deficit will GDP GDP per capita remain unchanged, while the current account surplus will current US$, billion current US$ narrow due to tepid remittance growth. Risks include global trade uncertainties and deteriorating asset quality of the 42.9 1446.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. domestic financial sector. 4/ 2023. 5/ 2024. 6/ 2024. provinces, such as Sudurpashchim and Karnali, continue to lag in Key conditions and challenges essential infrastructure. Nepal's economy expanded at an average annual rate of 4.2 per- Structural reform to boost private sector led growth has suffered cent from FY12 to FY23, slower than that of its peers, due to slug- from weak implementation, as reflected in the non-implementa- gish productivity and a private sector hindered by transportation tion of eight business law amendments passed in 2024. In March syndicates, geographic vulnerabilities, and governance issues. 2025, Parliament passed five ordinances (introduced in January Sluggish job creation and a high youth unemployment rate (22.7 2025), demonstrating reform intent to support private sector-led percent) have made emigration a preferred option for many young growth. Sustained progress hinges on prioritizing and implement- male Nepalis, contributing to a loss of skilled workforce. ing planned reforms. Nevertheless, remittances have been critical for growth, account- ing for 23 percent of GDP, and for driving welfare improve- Recent developments ments, despite weak economic performance and major disrup- tions such as the 2015 earthquake and the COVID-19 pandemic. Growth increased from 4.3 percent in the first half of FY24 Without remittances, over 2.6 million additional people would be (H1FY24) to 4.9 percent in H1FY25, primarily due to a pickup classified as poor. in industry and agriculture. Industrial activity was supported by increased hydroelectric capacity. Higher paddy production, dri- Human capital and access to basic services have improved, though ven by a favorable monsoon amidst September 2024 floods, bol- with significant regional disparities. Nearly 94 percent of house- stered agriculture. However, services sector growth moderated holds have gained access to electricity, and substantial progress slightly, reflecting weaker growth in financial and insurance and has been made in reducing the distance to public hospitals and accommodation and food services. The financial sector continued expanding the availability of paved roads. However, the poorest to face subdued private credit demand and rising non-performing FIGURE 1 / The current account surplus narrowed in H1FY25 FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 15 90 120000 10 80 100000 70 5 60 80000 0 50 60000 -5 40 -10 30 40000 20 -15 20000 10 -20 0 0 H1FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1FY25e 2010 2012 2014 2016 2018 2020 2022 2024 2026 Workers' remittances Balance of goods and services International poverty rate Lower middle-income pov. rate Current account balance Upper middle-income pov. rate Real GDP pc Sources: National Statistics Office, Nepal Rastra Bank, and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 12 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. loans. In February 2025, Nepal was re-listed on the Financial Action FY26 and FY27. As a result, poverty ($3.65/day) is expected to de- Task Force (FATF) grey list for not fully implementing money laun- cline to 5.5 percent, 4.8 percent, and 4 percent in 2025, 2026, and dering and terrorist financing reforms. 2027, respectively. The services sector, employing about one-fifth of the local workforce, will drive growth, backed by a rebound in Average headline inflation eased from 6.5 percent in H1FY24 to domestic trade. The industrial sector will benefit from expanded 5 percent in H1FY25, mainly due to lower housing, utilities, and hydroelectric capacity. However, a growth slowdown in the finan- restaurant and hotel inflation. However, food inflation remained cial and accommodation and food services sectors may weigh on elevated at 7.5 percent, with vegetable prices surging into double activity, while agriculture remains resilient. Consumer inflation is digits, with potential negative impacts on vulnerable households. forecast to average below 5 percent in the medium term, reflecting improved domestic agricultural production. The current account (CA) turned to a surplus of 3.9 percent of GDP in FY24, due to increased remittances. The surplus narrowed in The CA surplus is projected to narrow in the medium term, due to H1FY25 due to sluggish remittance growth, reflecting the lagged rising imports to support economic activity. Electricity exports are impact of the decline in migrant outflows, and higher merchandise expected to remain below import levels in FY25 but will increase in imports, partly driven by rising LPG and rice imports. This offset FY26 and FY27, with higher exports to Bangladesh and India. higher merchandise exports, aided by India’s tariff hikes on refined edible oil, while Nepal benefitted from zero-duty SAFTA access. De- The fiscal deficit is projected to stay at 2.5 percent of GDP in FY25, spite a services trade deficit, foreign exchange reserves remained as lower revenues are offset by decreased expenditures, partly due comfortable at 14.4 months of import cover by end-H1FY25. to lower budget allocations for medical allowances and goods and services. However, the deficit is expected to widen to 2.9 percent The fiscal deficit narrowed to 2.5 percent of GDP in FY24 and con- of GDP by FY27, in part due to higher interest payments and capi- tinued declining into H1FY25, as higher revenue outpaced slower tal spending. Public debt is expected to increase marginally, while expenditure. Revenue growth was broad-based, with higher excise remaining sustainable. duty collections on alcoholic beverages. While expenditure broadly declined, capital spending remained stable at 0.9 percent of GDP. The forecast faces domestic and external risks. Global trade uncer- tainties could slow growth, including in Nepal’s key partner coun- tries, which may lead to reduced tourist and remittance inflows. Outlook Domestically, deteriorating financial sector asset quality, frequent bureaucratic reshuffles, FATF grey list status, and delayed capital Growth is expected to pick up marginally from 3.9 percent in FY24 spending reforms may weigh on growth. On the upside, lower glob- to 4.5 percent in FY25, before averaging 5.4 percent annually in al oil prices may ease the import bill. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 5.6 2.0 3.9 4.5 5.2 5.5 Private consumption 6.8 0.7 1.1 1.6 2.1 2.3 Government consumption 9.6 -21.2 -4.2 -6.7 4.6 7.0 Gross fixed capital investment 3.4 -10.0 17.0 13.7 14.7 13.4 Exports, goods and services 34.1 3.3 18.1 18.7 13.4 10.5 Imports, goods and services 16.4 -18.7 -2.3 8.5 10.3 9.1 Real GDP growth, at constant factor prices 5.3 2.3 3.5 4.5 5.2 5.5 Agriculture 2.4 2.8 3.0 3.2 3.3 3.3 Industry 10.7 1.4 1.3 4.7 6.7 7.4 Services 5.3 2.4 4.5 5.0 5.8 6.1 Employment rate (% of working-age population, 15 years+) 75.6 75.6 75.7 75.9 76.1 76.4 Inflation (consumer price index) 6.3 7.7 5.4 5.0 4.5 4.3 Current account balance (% of GDP) -12.5 -0.9 3.9 3.6 2.8 2.4 Net foreign direct investment inflow (% of GDP) 0.4 0.1 0.1 0.2 0.2 0.3 Fiscal balance (% of GDP) -3.2 -5.8 -2.5 -2.5 -2.8 -2.9 Revenues (% of GDP) 22.9 19.3 19.4 19.2 19.4 19.7 Debt (% of GDP) 40.5 42.9 42.7 43.2 43.3 43.4 Primary balance (% of GDP) -2.2 -4.5 -1.0 -1.2 -1.3 -1.2 1,2 International poverty rate ($2.15 in 2017 PPP) 0.4 0.3 0.2 0.2 0.2 0.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.5 7.1 6.3 5.5 4.8 4.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 44.1 43.2 40.7 38.0 35.5 32.9 GHG emissions growth (mtCO2e) -1.0 -0.4 3.5 3.2 4.0 3.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2022-LSS-IV. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 13 This outlook reflects information available as of April 10, 2025. 1 2 PAKISTAN Population Poverty million millions living on less than $3.65/day 251.3 90.4 3 4 Life expectancy at birth School enrollment Pakistan’s economy continues to stabilize with easing infla- years primary (% gross) tion, improving financial conditions, and current account and primary fiscal surpluses. Despite strengthening, growth is ex- 66.4 82.7 5 6 pected to remain tepid, making job creation and poverty re- GDP GDP per capita duction amid high population growth challenging. Downside current US$, billion current US$ risks persist due to tight fiscal space, high financing needs, modest reserves, and global trade uncertainty. Reforms re- 373.4 1486.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. main key to reviving the private sector and reducing poverty. 4/ 2022. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Amid the economic crisis at the start of FY24, Pakistan undertook Real GDP at factor cost rose by an average of 1.5 percent y-o-y measures to prevent a sovereign default, stabilize the currency, in H1 FY25, slower than the 2.1 percent expansion in H1 FY24. and curb inflation. Multilateral funding helped to bridge financing Agriculture, with 37 percent of the labor force, posted a muted gaps and restore confidence, allowing import controls to ease. growth of 0.9 percent, due to drought-like conditions, pest infes- Strong agricultural growth supported economic stabilization by tations, and high base effects. Industry contracted by 0.4 percent, year-end. However, fiscal consolidation, high interest rates, dou- driven by high input costs, increased taxes, and lower govern- ble-digit inflation, and supply chain disruptions weighed on eco- ment development spending. Services, employing 39 percent of nomic activity, leading to declining real labor incomes and stagnat- the workforce, grew by 2.4 percent but was weighed down by ing poverty. Weak growth has carried over to H1 FY25. Downside weak agricultural and industrial spillovers, and failed to offset re- risks remain elevated, with continued stabilization dependent on al income declines in agriculture and manufacturing. The employ- the IMF-EFF program staying on track. Domestic policy and glob- ment-to-population ratio remains far below potential, particularly al trade uncertainties also pose significant risks. Continued fiscal among the youth and women. consolidation and deep structural reforms, as included in the Prime Minister’s Economic Transformation Agenda and Implementation Plan The current account posted a surplus of 0.6 percent of GDP in and Uraan Pakistan remain critical. Trade liberalization, reducing H1 FY25, reversing a 0.8 percent deficit in H1 FY24. Despite lower the state’s economic presence, and addressing business environ- commodity prices, higher imports, driven by base effects, rising ment constraints are required for higher exports and real incomes, domestic demand and relaxed import controls, outpaced exports as well as better jobs, including for youth and women. and widened the trade deficit. Investment also surged, increasing FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 3.3 4 100 200000 2.5 90 180000 3 2.6 80 160000 1.8 70 140000 1.7 60 120000 2 1.3 50 100000 1 40 80000 30 60000 0 20 40000 10 20000 0 0 -1 2010 2012 2014 2016 2018 2020 2022 2024 2026 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Q1 FY25 Q2 FY25 International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP Upper middle-income pov. rate Real GDP pc Sources: Pakistan Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 14 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. demand for imported machinery in power, textiles, and mining. Higher remittances, stemming from reduced political uncertainty Outlook and the market-determined exchange rate, more than offset the wider trade and primary income deficits. With lower external in- Real GDP growth is projected at 2.7 percent in FY25, supported flows and higher debt repayments, the balance of payments sur- by expanding private consumption and investment driven subdued plus narrowed to 0.9 percent of GDP, while gross reserves grew to inflation, lower interest rates, and recovering consumer and busi- $12.9 billion at end-December 2024. ness confidence. Output growth is expected to pick up in FY26 and FY27 but will remain low due to continued tight monetary and Headline inflation averaged 7.2 percent y-o-y in H1 FY25 down fiscal policies aimed at rebuilding buffers, and mitigating risks of from 28.8 percent in H1 FY24. Food inflation declined due to imbalances and global trade uncertainties. Combined with slow- adequate supply and lower global prices, while energy infla- er wage and employment increases, and high population growth, tion fell with stabilizing electricity tariffs. Core inflation, though the poverty headcount for FY25 is estimated to remain broadly un- still high, moderated as transportation and production costs changed at 42.4 percent, close to peak levels during COVID-19, im- dropped. Nonetheless, the persistently high price levels con- plying an additional 1.9 million poor people from FY24. However, tinue to strain the most vulnerable households. With slowing the poverty rate is expected to decrease to 41.0 percent by FY27. inflation, the policy rate was reduced from 20.5 percent in July 2024 to 12.0 percent. Real interest rates, however, rose into The current account is expected to record a surplus of 0.2 per- the double digits. cent of GDP in FY25, supported by stronger remittances and low- er oil prices. Still, it is projected to swing to a deficit as domes- The overall fiscal deficit narrowed to 2.8 percent of GDP in H1 tic demand recovers, driving imports higher. Due to large inter- FY25 from 4.7 percent in H1 FY24, as revenues outgrew expen- est payments, the fiscal deficit is estimated to remain elevated at ditures. Total revenue and tax revenues rose to 18.0 and 12.3 6.8 percent of GDP in FY25, before gradually declining. Fiscal sus- percent of GDP, respectively, following policy changes (higher tainability will remain predicated on managing interest payments, taxes on industry and excise tax rates, and reduced GST ex- rationalizing expenditures, and strengthening revenue mobiliza- emptions) and improved collections. A one-time high State Bank tion through expanding the tax base and reducing exemptions. of Pakistan profits boosted non-tax revenue. Total expenditures Inflation is expected to bottom out at 5.0 percent in FY25, driven rose to 20.8 percent of GDP in H1 FY25 primarily due to high- by base effects and lower commodity prices, before rising in er interest payments. Fiscal consolidation limited development the medium term due to stronger demand and additional tax spending, weakening the construction industry that employs 17 measures. The planned expansion of poverty reduction programs percent of the poor in daily wage jobs. Consequently, the prima- (BISP) to 500,000 beneficiaries and inflation-adjustment of bene- ry fiscal surplus almost doubled to a historic high of 6.6 percent fits could help cushion the poor from economic shocks but will of GDP in H1 FY25. be insufficient to reduce poverty markedly. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices 4.8 0.0 3.2 2.7 3.1 3.4 Private consumption 7.0 2.6 6.3 3.1 3.6 3.7 Government consumption -1.3 -3.9 -11.8 3.9 1.1 2.1 Gross fixed capital investment 4.6 -15.5 -3.6 3.6 3.3 3.6 Exports, goods and services 5.9 3.2 -1.1 0.7 1.7 2.5 Imports, goods and services 11.0 1.8 4.1 4.4 3.6 3.7 Real GDP growth, at constant factor prices 6.2 -0.2 2.5 2.7 3.1 3.4 Agriculture 4.2 2.2 6.2 1.7 2.9 3.1 Industry 7.0 -3.8 -1.7 1.7 2.6 3.0 Services 6.7 0.0 2.3 3.3 3.4 3.7 Employment rate (% of working-age population, 15 years+) 49.8 49.7 49.7 49.7 49.7 49.7 Inflation (consumer price index) 12.2 29.2 23.4 5.0 6.0 7.0 Current account balance (% of GDP) -4.7 -1.0 -0.5 0.2 -0.5 -1.0 Net foreign direct investment inflow (% of GDP) 0.5 0.2 0.6 0.6 0.6 0.6 Fiscal balance, including grants (% of GDP) -7.8 -7.7 -6.8 -6.8 -6.2 -5.6 Revenues (% of GDP) 12.1 11.5 12.6 15.4 14.3 14.3 Debt (% of GDP) 80.6 81.5 72.7 74.6 77.0 76.9 Primary balance, including grants (% of GDP) -3.1 -0.9 0.9 1.9 1.5 1.6 1,2 International poverty rate ($2.15 in 2017 PPP) 4.1 7.3 7.0 7.2 7.1 6.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 35.4 41.4 42.3 42.4 41.8 41.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 82.0 83.6 84.4 84.2 83.8 83.4 GHG emissions growth (mtCO2e) 4.1 2.1 4.2 4.9 4.7 4.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2018-HIES. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Poverty projections based on microsimulations using 2018-HIES and aggregate macroeconomic indicators (see Barriga-Cabanillas et al (2024)). Macro Poverty Outlook / April 2025 15 This outlook reflects information available as of April 10, 2025. 1 2 SRI LANKA Population Poverty million millions living on less than $3.65/day 22.0 2.5 3 4 Life expectancy at birth School enrollment The economic recovery continues, with growth, fiscal bal- years primary (% gross) ances, and external buffers exceeding expectations. Howev- er, household incomes, employment, and non-monetary 76.6 95.9 5 6 welfare remain well below pre-crisis levels, resulting in ele- GDP GDP per capita vated poverty and food insecurity. Amid high global econom- current US$, billion current US$ ic uncertainty, medium-term growth and poverty reduction prospects hinge on continued macro stability and the sus- 84.4 3828.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. tained and successful implementation of structural reforms. 4/ 2022. 5/ 2023e. 6/ 2023e. Key conditions and challenges Recent developments The economy began stabilizing in mid-2023, following the coun- The economy grew by 5 percent in 2024, driven by a construction- try’s worst post-independence economic crisis. Long-standing led rebound in industry and strong performance in tourism-related macroeconomic mismanagement and structural weaknesses, ex- services. Headline inflation, measured by the Colombo Consumer acerbated by exogenous shocks, led to the depletion of foreign Price Index, has remained negative since September 2024 (reach- reserves and a public debt default in 2022. Poverty increased ing -4.2 percent, y-o-y, in February 2025) due to downward ad- by 10 percentage points between 2021 and 2022 due to de- justments in energy prices, currency appreciation, and subdued clining real incomes amid job losses and high inflation. Reforms household demand. With declining inflation, the central bank re- under an IMF Extended Fund Facility (EFF) program helped sta- duced policy rates by 150 basis points in 2024, totaling a 800 basis bilize the economy, limiting the cumulative GDP contraction to points reduction since 2023. As commercial lending rates followed 9.5 percent between 2021 and 2023. Headline inflation eased suit, private credit began to recover, growing by 10.7 percent y-o-y (to 4 percent in December 2023 from 69.8 percent in Septem- in December 2024. ber 2022), usable official reserves rose (to 2.1 months of im- ports by end-2023 from 0.3 months at end-2022), and the public The merchandise trade deficit widened by 23.9 percent in 2024, and publicly guaranteed (PPG) debt-to-GDP ratio fell (to 111.7 as imports grew faster than exports. However, strong tourism rev- percent at end-2023 from 119.2 at end-2022). However, the re- enues and remittances flows supported a current account surplus forms, including utility pricing adjustments and new revenue mo- for the second consecutive year in 2024. Foreign exchange pur- bilization measures, strained household budgets. Facing higher chases by the central bank, amid the continued debt service sus- living costs, households adopted risky coping strategies, such as pension, and inflows from development partners, bolstered usable cutting human capital spending, borrowing more, and reducing reserves to 3.0 months of imports. This enabled the government to nutritious food intake. remove all remaining import restrictions, primarily on vehicles. The FIGURE 1 / Composition of tax revenue as a share of GDP FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 14 80 700000 12 70 600000 10 60 500000 50 8 400000 40 6 300000 30 4 200000 20 2 100000 10 0 0 0 2020 2021 2022 2023 2024p 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Income taxes VAT Excise taxes International poverty rate Lower middle-income pov. rate Trade taxes Others Tax revenue Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Sri Lanka, Budget Speech 2025, Department of Census and Source: World Bank. Notes: See footnotes in table on the next page. Statistics, and World Bank staff calculations. 16 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. rupee gained a cumulative 19.4 percent against the US dollar com- The current account is expected to be in deficit in 2025, as the pared to end-2022. impact from reduced exports (due to trade-related uncertainties), outweighs the impact on imports (from reduced demand and The primary surplus reached 2.2 percent of GDP in 2024, surpass- global oil prices). With a revival in domestic demand, inflation is ing the IMF EFF’s 2024 target (at Board approval) of 0.8 percent. projected to turn positive by mid-2025 but remain below the cen- This was driven by higher VAT revenues (due to increased rates tral bank’s medium-term target. Despite continued fiscal consoli- and the removal of exemptions) and under-execution of the capital dation, financing pressures will persist due to large T-bill refinanc- budget. Alongside growth and currency appreciation, the improved ing needs. Reflecting the crisis’s continued impact, over a third of primary balance helped reduce estimated PPG debt to 102.4 per- the population is expected to be in, or at the risk of falling into, cent of GDP at end-2024. External debt restructuring is nearly con- poverty in 2025. cluded, with nearly 98 percent of Eurobonds exchanged and strong progress made towards finalizing bilateral agreements with official Although fiscal and external buffers are being rebuilt, down- creditors. The IMF EFF’s third review was completed in March 2025. side risks remain exceptionally high. Moderating global growth, high global interest rates, and unprecedented trade Growth resulted in a poverty reduction of 2.7 percentage points in policy uncertainty are likely to constrain capital inflows, de- 2024, as 60 percent of the poorest quintile work in industry and ter investment, and weaken export demand, resulting in services. However, the economic recovery has not translated in- potential trade-related job losses. Further regressive indirect to widespread welfare improvements, with poverty (below $3.65 taxes could worsen the poverty outlook. The increased preva- per person per day, 2017 PPP), still at 24.5 percent, twice the 2019 lence of stunting and malnutrition raises concerns about long- level. Despite easing inflation, food prices more than doubled be- term human capital development and intergenerational poverty tween 2021 and 2024, contributing to elevated malnutrition and transmission. Limited economic opportunities and consequent food insecurity. The employment ratio declined from 46.0 percent increased outmigration of skilled workers pose concerns for the in Q2 2023 to 45.5 percent in Q2 2024 (y-o-y), and real wages re- recovery, and the quality of public service delivery, particularly main below their 2019 levels. Limited economic opportunities are in an aging society. driving emigration, with applications to the Foreign Employment Bureau increasing y-o-y in the first nine months of 2024. To ensure stronger medium-term growth, it is critical to maintain policy consistency and pursue structural reforms that support macro-fiscal-financial stability, enhance competitiveness, and at- Outlook tract fresh, non-debt-creating capital inflows. Developing human capital by improving education and health service delivery stan- Despite the recovery in 2024, medium-term growth is expected to dards is equally critical. Strengthening the social protection system remain modest, reflecting the scarring effects of the crisis, struc- will safeguard the most vulnerable and ensure the recovery’s ben- tural impediments to growth, and global economic uncertainties. efits are inclusive and broad-based. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at constant market prices -7.3 -2.3 5.0 3.5 3.1 3.1 Private consumption -0.5 -1.6 3.2 3.3 3.4 3.4 Government consumption 1.4 -5.4 -0.8 1.6 1.1 1.0 Gross fixed capital investment -24.5 -8.4 18.8 7.0 4.0 4.7 Exports, goods and services 10.2 12.0 5.6 -6.3 2.1 2.4 Imports, goods and services -19.9 6.5 11.1 -4.1 3.2 4.3 Real GDP growth, at constant factor prices -7.0 -2.6 4.6 3.5 3.1 3.1 Agriculture -4.1 1.6 1.2 1.5 1.8 1.9 Industry -16.0 -9.2 11.0 5.9 4.1 3.3 Services -2.6 -0.2 2.4 2.6 2.8 3.1 Employment rate (% of working-age population, 15 years+) 47.5 46.3 45.2 45.2 45.2 45.2 Inflation (consumer price index) 46.4 17.4 1.2 2.5 3.2 4.5 Net foreign direct investment inflow (% of GDP) 1.2 0.8 0.9 0.5 0.6 0.7 2 International poverty rate ($2.15 in 2017 PPP) 4.1 5.4 4.6 3.9 3.7 3.5 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 22.7 27.1 24.5 22.7 21.9 21.2 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 64.4 68.0 65.9 65.0 64.1 63.2 GHG emissions growth (mtCO2e) -6.7 -3.6 5.2 5.4 5.1 4.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Components of GDP by expenditure for 2022-2024 are estimates, as the data published on March 18, 2025, by authorities only included GDP by production. 2/ Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 17 MPO