Crack Grade B 33

South Asia Economic Focus 2019

The report is a bi annual joint product of the World Bank’s Office of the Chief Economist
for the South Asia Region (SARCE) and the Macroeconomics, Trade and Investment (MTI)
Global Practice.
South Asia as used in this report includes Afghanistan, Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka.

South Asia is projected to slow to 5.9 percent in 2019.

Declining industrial production and imports, as well as tensions in the financial markets
reveal a sharp economic slowdown in South Asia,”

The report remains cautiously optimistic that a slight rebound in investment and private
consumption could jumpstart South Asia’s growth up to 6.3 percent in 2020 and 6.7
percent in 2021. Current account deficits have declined in the region, as is often the
case during economic downturns.

The oil price remains very volatile but is expected to be below 60 USD per barrel in the
medium-run.

India’s GDP accounts for 84 percent of regional GDP and hence drives regional growth.

The remarkable weakness of Indian economic activity during the first half of 2019 is
largely driven by external and cyclical factors. In India, after the broad-based
deceleration in the first quarters of this fiscal year, growth is projected to fall to 6.0 this
fiscal year 2019-20 (FY2020). Growth is then expected to gradually recover to 6.9
percent in fiscal year 2020-21(FY2021) and to 7.2 percent in the following year 2021-22
(FY2022).

Bangladesh and Nepal are estimated to grow faster than India in 2019.

The economy experienced a significant and broad-based growth deceleration with a

sharp decline in private consumption on the demand side and the weakening of
growth in both industry and services on the supply side.

Reflecting on the below-trend economic momentum and persistently low food prices, the
headline inflation averaged 3.4% in 2018-19 and remained well below the RBI's mid-
range target of 4% in the first half of 2019-2020. This allowed the RBI to ease monetary
policy via a cumulative 135 basis point cut in the repo rate since January 2019 and shift
the policy stance from “neutral” to “accommodative”.

The current account deficit had widened to 2.1% of the GDP in 2018-19.

In Bangladesh, GDP is projected to moderate to 7.2 percent this fiscal year. In Nepal,
GDP growth is projected to average 6.5 percent.

In Pakistan, growth is projected to deteriorate further to 2.4 percent this fiscal year.

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