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The World Bank said it expects India and its neighbors to grow faster than other regions this year, matching the bleak outlook for China and much of East Asia.
The bank on Tuesday raised its 2023 economic growth forecast for South Asia, which also includes countries such as Pakistan, Bangladesh and Sri Lanka, to 5.8% from 5.6%.
The bank said this week that South Asia’s rapid growth contrasts with China and East Asia, which are set to grow at their slowest pace in five years as the region battles U.S. protectionism and rising debt. one. China’s economy is expected to grow by 4.4% in 2024, compared with India’s 6.3%.
Franziska Ohnsorge, the World Bank’s chief economist for South Asia, told the Financial Times that South Asia’s growth has made it the “complete opposite” of China and East Asia.
However, the World Bank warns that South Asia is not growing fast enough to meet local governments’ goals of reaching high-income levels within a generation, leaving them facing long-term challenges including poverty and high debt.
“This region does have a strong foundation because it has a young workforce and there’s a lot of room to catch up,” Ornzorg said. “Compared to other regions, it will probably perform well. But if you compare it to (their) development goals… it’s hard to be optimistic because there’s still a long way to go.”
The per capita income in South Asia is about US$2,000, only one-twentieth of that in high-income countries.
The World Bank also said it expects economic growth in South Asia to be slower than before the Covid-19 pandemic, with prospects threatened by various factors including climate change and weak global demand.
India surpassed China this year to become the world’s most populous country, with a population of more than 1.4 billion, and global investors hope it can replicate the growth it has enjoyed in China in recent decades.
Indian authorities have sought to implement business-friendly reforms to boost private investment, including building infrastructure, introducing manufacturing incentives and relaxing strict labor laws.
However, many economists believe India needs faster growth to create jobs for its massive population.
Growth in South Asia is expected to benefit from recovery in Pakistan and Sri Lanka, both of which have experienced severe crises over the past year. Sri Lanka, which defaulted on its debt last year, is expected to grow 1.7% next year after shrinking this year. Pakistan is also expected to return to modest growth of 1.7% next year.
“The potential for long-term, sustainable growth is broadly stable,” Ornzorg said. “The only problem for the region is that if the rest of the world slows down, it will be difficult to sustain this growth momentum.”
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