South Asia's regional GDP growth slowed to a decade low of 4.6% in 2013 due to both external and domestic challenges. Growth in India fell below 5% and Pakistan's growth averaged 3.5% since 2010. However, regional growth is projected to strengthen to 5.7% in 2014 and rise further to 6.7% by 2016, led by increases in domestic investment and external demand. Risks to the outlook include the ability of countries to sustain fiscal reforms and reduce inflation, as well as potential global economic issues.

1. Global Economic
Prospects
January 2014
South Asia
Region
Sanket Mohapatra
World Bank
January 2014
www.worldbank.org/globaloutlook
1

2. South Asia’s regional GDP
growth was a relatively weak
4.6 percent in 2013.
2

3. GDP growth in South Asia slowed to a
decade low during 2012 and 2013
GDP growth (percent)
Source: World Bank, national sources
3

4. .
Growth in India is estimated
to have fallen below 5% in
current fiscal year.
4

5. .
Pakistan’s growth has
averaged 3.5% since 2010.
5

6. A challenging external
environment played a role.
6

7. A challenging external
environment played a role.
But domestic imbalances and policy
uncertainties were important
contributors as well.
7

8. A sharp adjustment in capital flows during
mid-year on tapering apprehensions
Gross capital flows to South Asia (millions of US$)
Source: World Bank, Dealogic
8

9. Currency depreciation in India, Nepal and Pakistan
in 2013
Source: World Bank, Datastream.

10. Currency depreciation in India, Nepal and Pakistan
in 2013
Source: World Bank, Datastream.

11. Currency depreciation in India, Nepal and Pakistan
in 2013
Source: World Bank, Datastream.

12. Currency depreciation in India, Nepal and Pakistan
in 2013
Source: World Bank, Datastream.

13. Regional growth is expected to
strengthen to 5.7% in 2014.
Growth is projected to rise to
6.7% by 2016.

14. Regional growth is expected to
strengthen to 5.7% in 2014.
Growth is projected to rise to
6.7% by 2016.

15. Regional growth is expected to
strengthen to 5.7% in 2014.
Growth is projected to rise to
6.7% by 2016.

16. A gradual strengthening of regional growth will be
led by domestic investment and external demand
16

17. A gradual strengthening of regional growth will be
led by domestic investment and external demand
17

18. A gradual strengthening of regional growth will be
led by domestic investment and external demand
18

19. Risks to the outlook
• Domestic risks dominant:
– Ability to sustain fiscal and policy reforms
– Reducing inflation expectations
– Political uncertainties (national elections in Afghanistan, Bangladesh
and India in 2014)
– Progress in alleviating supply-side constraints in
energy, infrastructure, agriculture
• Disorderly adjustment to financial tightening accompanying
normalization of macro policy in high income countries
• Fragile global growth
– Euro Area not out of woods yet
– Risks from US debt ceiling negotiations, geopolitical risks in Middle
East
• Doing better will depend on macro stability and productivity
enhancing reforms to raise longer-term potential growth
19

20. Global Economic
Prospects
January 2014
South Asia
Region
Sanket Mohapatra
World Bank
January 2014
www.worldbank.org/globaloutlook
20