South Asia’s economic horizon glows with promise as 2024 forecasts herald it as the world’s fastest-growing region. Driven by the robust engines of India, Pakistan, and Sri Lanka, the region seems poised to stride confidently forward.
This expected growth of 6.0%, an impressive figure in the global context, paints a picture of vitality and progress. Yet, beneath this veneer of prosperity, challenges simmer, hinting at a complex narrative that awaits unpacking.
The World Bank’s “Jobs for Resilience” report provides a crucial lens through which to view this landscape, blending optimism with a dose of reality. It reveals a region at a crossroads, where vibrant growth meets structural vulnerabilities.
As South Asia juggles these dynamics, the focus sharpens on the need for strategic reforms and resilience-building measures, framing a storyline that is as much about caution as it is about celebration.
Robust Growth Amid Structural Challenges
South Asia is on a trajectory to maintain its status as the world’s fastest-growing region through 2025, with an impressive growth rate of 6.0% projected for 2024, spearheaded by India’s dynamic economy and promising recoveries in Pakistan and Sri Lanka.
Yet, the World Bank’s latest regional outlook, “Jobs for Resilience,” casts a shadow on this bright forecast, revealing deep-seated structural challenges that could dampen the region’s economic vigor.
The Dichotomy of Growth and Employment
Despite this promising growth, a closer examination reveals a region grappling with pre-pandemic growth levels and an over-reliance on public spending.
The stark slowdown in private investment growth across South Asian countries is a red flag, signaling a need for a strategic pivot to ensure sustainable economic expansion.
Moreover, the burgeoning working-age population—a potential demographic dividend—is met with insufficient job creation, posing a significant hurdle to harnessing the region’s full economic potential.
Navigating Fiscal Fragility and Climate Concerns
Martin Raiser, the World Bank’s Vice President for South Asia, underscores the importance of bolstering private investment and employment growth to fortify the region against fiscal fragilities and the ever-looming threat of climate shocks.
The current growth, though strong, is tethered to shaky foundations that require robust policy interventions to secure a resilient future.
The Employment Conundrum
A striking revelation from the World Bank report is the declining employment ratio in South Asia, now standing at 59% compared to 70% in other emerging markets.
This decline, especially pronounced among working-age men and even more so among women, underscores a missed opportunity to leverage the demographic dividend for economic upliftment.
Franziska Ohnsorge, World Bank Chief Economist for South Asia, estimates that aligning the region’s employment share with that of other emerging markets could potentially boost output by 16%.
Unlocking Growth Through Firm Expansion and Job Creation
The path to vibrant, competitive firms—and by extension, robust private investment and job growth—lies in overcoming institutional and economic hurdles.
The report advocates for a multi-faceted policy approach focusing on trade openness, access to finance, and the removal of barriers to women’s economic participation, among others.
Such measures promise not just to spur firm growth and job creation but also to enhance the region’s capacity to adapt to climate change.
Country-Specific Outlooks Paint a Mixed Picture
- Bangladesh and Bhutan both anticipate growth rates of 5.7% in FY24/25, though Bangladesh faces challenges from high inflation and trade restrictions.
- India continues to lead the region’s economy, expected to achieve a 7.5% growth rate in FY23/24, with sustained activity in services and industry.
- Maldives sees a slight downgrade to 4.7% growth in 2024, reflecting a shift in tourist preferences.
- Nepal looks forward to a 4.6% growth rate in FY24/25, buoyed by hydropower exports, while Pakistan and Sri Lanka are poised for recovery, with growth rates of 2.3% and 2.5% respectively in FY24/25.
The World Bank’s analysis not only highlights South Asia’s impressive economic trajectory but also emphasizes the critical need for policy reforms to navigate the region’s complex challenges.
As South Asia strides toward continued growth, the focus must remain on creating a resilient and inclusive economy that can weather both fiscal and climate-related shocks.
Table With Historical Data
| Real GDP growth at constant market prices (percent) | Revision to forecast from October 2023 (percentage point) | |||||||
| Country fiscal year | ||||||||
| Calendar year basis | 2022 | 2023(e) | 2024(f) | 2025(f) | 2024(f) | 2025(f) | ||
| South Asia region (excluding Afghanistan) | 5.7 | 6.6 | 6.0 | 6.1 | 0.4 | 0.3 | ||
| Maldives | Jan. to Dec. | 13.9 | 4.0 | 4.7 | 5.2 | -0.5 | -0.3 | |
| Sri Lanka | Jan. to Dec. | -7.3 | -2.3 | 2.2 | 2.5 | 0.5 | 0.1 | |
| Fiscal year basis | 21/22 | 22/23(e) | 23/24(f) | 24/25(f) | 23/24(e) | 24/25(f) | ||
| Bangladesh | July to June | 7.1 | 5.8 | 5.6 | 5.7 | 0.0 | -0.1 | |
| Bhutan | July to June | 4.8 | 4.6 | 4.9 | 5.7 | 0.9 | 1.1 | |
| India | April to March | 9.7 | 7.0 | 7.5 | 6.6 | 1.2 | 0.2 | |
| Nepal | mid-July to mid-July | 5.6 | 1.9 | 3.3 | 4.6 | -0.6 | -0.4 | |
| Pakistan | July to June | 6.2 | -0.2 | 1.8 | 2.3 | 0.1 | 0.0 | |
Sources: World Bank Macro Poverty Outlook and World Bank staff calculations.
Note: (e) = estimate; (f) = forecast. GDP measured in average 2010-19 prices and market exchange rates. Pakistan is reported at factor cost. National accounts statistics for Afghanistan are not available.
To estimate forecasts for regional aggregates in the calendar year, fiscal year forecasts are converted to the calendar year by taking the average of two consecutive fiscal years for Bangladesh, Bhutan, Nepal, and Pakistan because quarterly GDP forecasts are not available.
The World Bank’s development updates for Bangladesh, Nepal, Pakistan, and Sri Lanka were also released today.
Sources: THX News & The World Bank.
