By Judith Ugwumadu | 6 October 2014
The World bank says South Asia’s economy could grow by 6.4% in 2016, but warns that the risk of political turmoil and weak fiscal policies would dampen any expansion.
It has called for urgent reforms to improve revenue performance to spur growth, as it published its twice-a-year South Asia Economic Focus report, which revealed that the region’s economy could grow by 6% in 2015 and by 6.4% in 2016 compared to 5.4% this year.
Martin Rama, chief economist for South Asia at the World Bank, said the region’s outlook over the next few years indicated wide economic stability and a pick-up in growth with potential risks focused on the fiscal and structural reform side.
The report projected that Bangladesh’s economy could grow by 6.2% in 2014/15 if the country regained political stability with a renewed focus on growth. It said government remittances are expected to pay for higher domestic consumption, while infrastructure investments would support strong demand.
Afghanistan is on a more fragile path, owing to security and political concerns, after having grown by a modest 1.5% in 2013. The bank has urged this country to reduce public finance leakages, and strengthen tax and customs enforcement. The report also called on Afghanistan to speed up the implementation of the new value-added tax and increase the 5% rate to 10%.
India was benefiting from a ‘Modi dividend’, the report said, and the country is expected to grow 5.6% this year and 6.4% next year. But economic reforms, especially the implementation of the Goods and Services Tax, are needed for India to achieve its full long-term growth potential and competiveness.
Sri Lanka is expected to continue its strong growth at 8.2% in 2015, rising from 7.8% this year, if it presses ahead with its fiscal consolidation and debt reduction plans, the bank said.
And Pakistan, the region’s second biggest economy, is expected to continue its path towards gradual growth recovery, manageable inflation and fiscal consolidation. The report said the country could see growth of 4.1% this year and 4.4% in 2015.
