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Growth in South Asia is expected to increase to 6.4 percent this year, exceeding earlier projections and keeping the region on track to be the fastest growing in the world. Unlocking untapped potential by increasing women¡¯s participation in the labor force and opening further to global trade and investment could help the region grow even faster and achieve its development goals.

The latest South Asia Development Update ¨C ¨C forecasts a broad-based upturn in the region, supported by strong domestic demand in India and faster recoveries in most other South Asian countries. Growth is expected to remain robust at 6.2 percent a year for the next two years.

This forecast is subject to downside risks including extreme weather, debt distress, and social unrest. Policy missteps such as delays in planned reforms could also set the region back. Fragile fiscal and external positions leave little buffer against these risks.

Country Outlooks

The economic outlook for all South Asian countries except Bangladesh and Maldives has been upgraded from six months ago. In Bangladesh, output growth is expected to slow to the range of 3.2 to 5.2 percent (with a mid-point of 4 percent) in FY24/25, as significant uncertainties are expected to keep investment and industrial growth subdued while agriculture growth is expected to moderate following the recent floods. Bhutan¡¯s economy is expected to grow by 7.2 percent in FY24/25, boosted by faster-than-expected recovery in tourism and strong public investment at the beginning of a new five-year plan. Growth in India is projected to reach 7.0 percent in FY24/25 with larger-than-expected agricultural output and policies to foster employment growth contributing to strong private consumption growth. In Maldives, output growth is expected to remain modest at 4.7 percent in 2025, if major bilateral government debt repayments can be rescheduled. In Nepal, growth is projected to pick up to 5.1 percent in FY24/25 amid an expanding hotel sector, growing tourist arrivals and strengthening industrial sector. Pakistan continues its economic recovery as the relaxation of import controls and projected policy rate cuts are expected to lift growth to 2.8 percent in FY24/25. In Sri Lanka, output is expected to grow 3.5 percent in 2025, on the back of stronger-than-expected rebound in industrial activity and tourism, if debt restructuring and planned reforms remain on track.

Last Updated: Oct 10, 2024

Last Updated: Oct 10, 2024

Across South Asia, we aim to boost water security and resilience to climate and disaster risks, support the renewable energy transition, and enable job creation. In fiscal 2024, the World Bank approved $9.4 billion for 35 operations in the region, including $3.2 billion in IBRD commitments and $6.2 billion in Å·ÃÀÈÕb´óƬ commitments. We also supported 59 advisory services and analytical products for eight countries, totaling $62.8 million.

Boosting water security for a climate-resilient future. On average, 60 million people a year in South Asia have been affected by natural disasters since 2010. We are helping affected communities with investments that build resilience and improve productivity. In India, a new $300 million project will provide more and better access to water and sewer services to around 2 million people in 21 cities. In Bangladesh, we committed $102 million to support an economic corridor along the Jamuna River to enhance the livelihoods of residents and protect the unique ecosystem. In Pakistan, we committed just over $71 million in additional financing to continue supporting flood control and climate resilience in the highly vulnerable Sindh province, which bore the brunt of catastrophic floods in 2022. The Afghanistan Water Platform, which we co-chair with the UN, coordinates in-country humanitarian assistance and investments in water-related basic needs.

Supporting the transition to low-carbon and renewable energy. We are working with countries across the region to help them achieve their emissions-reduction goals and increase the share of renewables in their energy mix. In Bangladesh, we committed $300 million to improve the efficiency of gas distribution and reduce methane emissions along the natural gas value chain. In Pakistan, we committed $1 billion to support the completion of a large hydropower project as part of our broader support to renewable energy generation. In Nepal, we signed a Memorandum of Understanding with the Asian Development Bank to strengthen the country¡¯s hydropower sector through joint financing and advisory services. In Bhutan, we provided technical assistance to help establish rules and procedures for participation in carbon markets so the government can monetize emission reduction credits from hydropower and other renewable natural resources.

Enabling jobs to foster equality, prosperity, and resilience. South Asia is not creating enough jobs to keep pace with its rapidly growing working-age population. Our latest South Asia Development Update: Women, Jobs, and Growth shows that private investment and robust growth of businesses and firms are essential to create the number and quality of jobs the region needs. To help close this gap, we are supporting countries through critical policy reforms, skills programs, and analytical work.

Following the economic crises in Sri Lanka and Pakistan, we are supporting a series of reforms to put both economies on a more sustainable growth path by boosting competitiveness and laying the foundation for a private-sector-led recovery and job creation. A critical area of focus is on increasing women's labor-force participation as only one in four women in South Asia are currently in the workforce.

We also support inclusive skills programs to better prepare people for gainful employment. In Bangladesh, we provided $300 million to equip about 900,000 disadvantaged rural youth¡ªmany of whom are female¡ªwith skills, alternative education, entrepreneurship support, and employment opportunities. In India, we have committed $100 million to training, upskilling, and providing more than 300,000 women and youth with jobs in high-growth sectors including renewable energy, information and technology services, and hospitality. We have also provided $74 million to India for a jobs-development project with leading private sector companies.

For Bhutan, whose increasingly educated workforce is emigrating at an unprecedented rate, we published a report on the national labor market with recommendations to support private sector job creation.

Last Updated: Oct 31, 2024

Like other small island developing states, Maldives has a small, undiversified economy that makes it particularly vulnerable to external shocks, including sky-rocketing food and energy prices in the wake of Russia¡¯s invasion of Ukraine. The country spends over 10 percent of its GDP annually to import diesel to meet energy needs. In 2020, its GDP contracted by 34 percent as the pandemic shut down tourism, the main driver of economic growth. In 2022, Maldives was hit by the surge in global commodity prices, putting pressure on domestic inflation, the government¡¯s fiscal position, and the balance of payments. It is also extremely vulnerable to rising sea levels and extreme weather brought on by climate change. Much of the country lies just a meter above sea level; current projections show that it is likely to be fully submerged by rising sea levels by the end of this century.

The island nation is building resilience by scaling up renewable energy capac?ity, investing in green infrastructure, restoring mangroves to protect against coastal flooding, and ramping up early warning systems. Maldives has also committed to becoming a net-zero carbon emitter by 2030. But amid highly constrained public borrowing capacity, the private sector must play a critical role to fill the financing gap. With just over $12 million in World Bank concessional financing, the Acceler?ating Sustainable Private Investments in Renewable Energy and the Accelerating Renewable Energy Integration and Sustainable Energy projects are helping install a total of 53.5 megawatts of solar panels on the islands and on the open ocean, build 40 MWh of battery storage solutions for the country, and upgrade the electricity grid to include cleaner energy sources.

This Bank financing leveraged an additional $140 million¡ªabout 12 times the amount of funding for every dollar spent¡ªincluding from the private sector. Bank Group guarantees will help mitigate the risks that kept investors from putting their money into a small island with a volatile economy. By allaying investors¡¯ fears and attracting more private investment, this approach has made renewable energy proj?ects more financially sustainable for Maldives.

The first solar project in Maldives under ASPIRE attracted only four investors in 2014; buoyed by the risk mitigation structure, there were a record 63 bids in 2022. Greater private investment has also driven down costs¡ªthe power purchase price, which is the purchase price per unit of electricity that a power company agrees to with a solar power plant, decreased over this period from 21 cents per unit of electricity to less than 9.8 cents, significantly below the current price of imported fossil energy. These successes in attracting private investors have helped Maldives expand renewable energy, reduce import costs, and generate affordable and reliable clean energy.

Last Updated: Oct 03, 2023