SOUTH ASIA needs to increase its exports to sustain its high growth and reach its full economic potential, the World Bank said in a report on Sunday (7).
South Asia holds on to its top spot as the world’s fastest growing region, with growth set to step up to 7 per cent in 2019, then 7.1 per cent in 2020 and 2021, the bank said in its twice-a-year regional economic update.
The region’s robust growth is mainly driven by domestic demand, which in turn swelled imports and far outstripped exports, said the latest edition of the South Asia Economic Focus, ‘Exports Wanted.’
Hartwig Schafer, World Bank Vice President for the South Asia Region said: “South Asia’s exports performance has dropped in the last few years to languish at far below its potential and while growth still looks robust we are concerned about whether this can hold up over the longer term.”
Across South Asia, imports grew much stronger than exports in the last two years, reversing the region’s exports dynamics of the early 2000s.
Strong domestic demand, fueled by a consumption and investment boom, resulted in high import growth of 14.9 per cent in 2017 and 15.6 per cent in 2018, which is nearly twice as high as the region’s export growth.
In comparison, the South Asia’s exports grew by only 4.6 per cent in 2017 and 9.7 per cent in 2018.
The report offers a positive outlook based on recent months as export growth is picking up from its low levels, even outpacing imports growth in the third and fourth quarter of 2018.
This recent acceleration of export growth, combined with a slowdown in import growth, is expected to continue in 2019 and beyond, with both rates eventually converging at an average 11 per cent growth rate, the bank said.
But despite this recent progress, South Asian countries still export only one-third of their potential, and the gap is widening, the report showed.