South Asia Projected to Grow by Nearly 6% in 2023

New Delhi: South Asia is expected to grow by 5.8% in 2023, making it the fastest-growing region in the world even as the pace remains below pre-pandemic levels, the World Bank said today.

The latest South Asia Development Update from the World Bank projected growth in the region to slow slightly to 5.6% in 2024 and 2025, as post-pandemic rebounds fade and reduced global demand weighs on economic activity.

At almost 6% this year, the region is growing faster than all other emerging markets, said Franziska Ohnsorge, the organization’s chief economist for South Asia.

“While high inflation and interest rates have bogged down many emerging markets, South Asia seems to be forging ahead,” the World Bank noted in its report. Still, “for all of the countries here this represents a slowdown from pre-pandemic levels,” Ohnsorge said, adding that the growth wasn’t fast enough to meet various development goals set by countries in the region. Despite the progress, the region still has a long way to go, the report said. Per capita incomes in South Asia are around $2,000 — one-fifth of the level in East Asia and the Pacific region.

The current growth rates, while high, are not sufficient for South Asian nations to achieve high-income status within a generation, it said. Additionally, the growth is not necessarily equal.

The World Bank said another concern was that government debt in South Asian countries averaged 86% of GDP in 2022, which is higher than other emerging markets. It added the high debt could increase the risk of defaults and raise borrowing costs.

Ohnsorge said that governments in South Asia could improve fiscal conditions by seizing on opportunities for energy transition, which could create jobs, reduce reliance on energy imports and cut pollution levels.