The World Bank said South Asia is set to log growth higher than any other developing country region in the world this year.
In the latest South Asia Development Update, the World Bank forecast South Asia to expand 5.8 percent in 2023. However, this would be slower than its pre-pandemic pace and also not sufficient to achieve its development goals.
Going forward, as post pandemic rebounds fade amid tighter monetary policy, fiscal consolidation and weak global demand, South Asia will grow at a moderate pace of 5.6 percent next year and 2025, the World Bank said.
"Countries need to urgently manage fiscal risks and focus on measures to accelerate growth, including by boosting private sector investment and seizing opportunities created by the global energy transition," World Bank Vice President for South Asia Martin Raiser said.
India, which accounts for the bulk of the South Asia's economy, is expected to expand strongly by 6.3 percent in the FY23/24. However, this is much weaker than the 7.2 percent growth estimated for FY22/23. The World Bank projected growth to improve to 6.4 in the FY24/25.
The lender observed that governments had limited room to fully capitalize on the global energy transition due to constrained fiscal challenges. For South Asia, the energy transition could present an opportunity for future growth as well as job creation, the World Bank noted.
The bank urged countries to encourage firms to adopt more energy-efficient technologies through market-based regulations, information campaigns, broader access to finance, and reliable power grids.
