Slowdown in remittance to weigh on BD, Sri Lanka: WB
Bangladesh is likely to achieve the highest growth-6.7 per cent among South Asian countries in 2018, with the lowest growth of 3.4 percent in Afghanistan, 5.1 per cent in Sri lanka and 5.5 per cent in Pakistan, according to the World Bank report published recently.
But recent adverse weather conditions in some countries and a protracted slowdown in remittance inflows would weigh on domestic consumption in Bangladesh and Sri Lanka, the multi-donor agency said in its outlook.
Growth in the region is expected to pick up to 6.9 percent in 2018, and stabilize around 7.2 percent over the medium term, but remain slightly below June projections due to the weaker-than-expected recovery in domestic demand, the World Bank said in its report title Global Economic Prospects-2018.
"The region's growth prospects appear robust, with household consumption expected to remain strong, exports expected to recover, and investment projected to revive with the support of policy reforms and infrastructure improvements", the World Bank said.
But recent adverse weather conditions have reduced agricultural output in some cases which continue to pose risks to regional growth. Recently, remittance inflows have been subdued due to fiscal consolidation and growth slowdowns in the Middle East, which constitutes roughly half of remittances to South Asia.
Bangladesh will grow at an average of 6.7 percent a year over FY2018-2020, benefiting from strong domestic demand and strengthening exports. Low interest rates and improved infrastructure are expected to lift investment, the World Bank forecasts in its outlook over South Asian region.
Remittances are expected to rebound as the growth firms in Gulf Cooperation Council (GCC) countries and support private consumption, the World Bank report said.
Growth in India is expected to remain stable at an average 5.9 percent a year over the medium term. In Pakistan, growth is forecast to pick up to 5.5 percent in FY2017/18, and reach at an average 5.9 percent a year over the medium term on the back of continued robust domestic consumption, rising investment, and a recovery in exports, it said.
In Sri Lanka, the world Bank sees growth will be average 5.1 percent a year over 2018-2020, mainly reflecting strong private consumption and investment growth. Exports will be supported by the reinstatement of the Generalised Scheme of Preferences (GSP+) with the European Union.
Bhutan's GDP is expected to expand 6.7 percent in FY2017/18 and reach an average 7.6 percent a year toward 2020, supported by hydropower-related construction and policies supporting the private sector. In Nepal, growth is expected to settle at 4.5 percent a year, on average, in the medium term as post-earthquake reconstruction winds down.
Growth in Afghanistan is forecast at 3.4 percent in 2018 to and average around 3.1 percent a year over the medium term, assuming no further deterioration in the security situation.
But the World Bank sees the main risks to the outlook are domestic, including fiscal slippages in Bangladesh, Maldives and Pakistan, setbacks to reforms to resolve corporate and financial sector balance sheet deterioration in Bangladesh and India and disruptions due to natural disasters, and persistent security challenges weakening domestic demand in Afghanistan.
As an external risk, an abrupt tightening of global financing conditions or a sudden rise in financial market volatility could set back the South Asian growth. On the other hand, stronger-than-expected global growth could benefit the more open economies in the region in the near term, the report observes.
Increasing contingent liabilities related to infrastructure projects in Pakistan, debt write -offs for farmers in India, and slippages relating to upcoming elections and weak tax revenues in Bangladesh, Nepal, Pakistan could derail fiscal consolidation efforts.