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South Asia 2012 Regional Brief

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South Asia Regional Brief 2012

RBZ India

South Asia

April 2012: South Asia has experienced a long period of robust economic growth, averaging 6 percent a year over the past 20 years. This strong growth has translated into declining poverty and impressive improvements in human development. Still, the South Asia Region is home to most of the developing world’s poor. According to the World Bank’s most recent poverty estimates, about 571 million people in the Region survive on less than $1.25 a day, which accounts for more than 44 percent of the developing world’s poor.

As referenced in the Global Economic Prospects 2012, real GDP growth in South Asia is expected to moderate to 5.8 percent in 2012, reflecting modest economic activity in traditional export markets of the United States and Europe. While this is a deceleration from an estimated 6.6 percent in 2011 and 9.1 percent in 2010, regional growth is close to its long-term average of 6 percent during 1998-2007, reflecting relatively strong activity in Bangladesh, India and Sri Lanka. GDP growth is projected to strengthen to 7.1 percent in 2013.

South Asia will play an important role in the global development story as it takes its place in the Asian Century. It has the world’s largest working age population, ¼ of the world’s middle class consumers, the largest number of poor and undernourished in the world, and several fragile states of global geopolitical importance. With inclusive growth, South Asia has the potential to change global poverty.

World Bank Assistance

The World Bank Group is a key development partner in South Asia with a portfolio of 210 projects and current total commitments of $38.1 billion as of June 30, 2011. The Bank’s strategy for South Asia was updated in March 2012. With a lending program of about $8 billion in FY 12, the updated strategy comprises of four pillars: creating more and better jobs by mitigating constraints on growth, building skills and improve health and nutrition outcomes, both closely linked to a focus on women, promoting regional cooperation and strengthening governance. It also provides a road map to accelerate growth and foster human development and informs the development of country specifics. In fiscal year 2011, the World Bank approved 44 projects in the region.

Food Price Volatility

While South Asia navigated the financial crisis better than most regions, the region suffered the worst in terms of trade deterioration during previous food and fuel crises. According to the Food Price Watch 2012, while global food prices declined 8 percent between September and December 2011 due to increasing supplies and uncertainty about the global economy, they still remain volatile and high.

Global Uncertainty

According to the Global Economic Prospects 2012, demand for the region’s exports of goods and services is projected to slow in calendar year 2012 and lead to a near halving of export growth to 11.6 percent in 2012, from 21 percent in 2011, due to stagnant GDP in the European Union and the projected global slowdown, including the influence of tighter monetary policy in China and fiscal consolidation in Europe.

With markets in the United States and Europe expected to experience prolonged weakness, South Asia countries have the opportunity to re-think and pursue new sources of growth in both domestic and external markets. This may include focusing on export growth toward faster growing markets, as well as internal market enhancements through structural and governance reforms. Such actions would help boost export demand, help raise investment, provide better jobs and generate an environment for more inclusive growth.

Inclusive Growth and Creating Quality Jobs

The key asset of South Asia is its people. South Asia has a young population and the lowest female participation rate in the labor force. The demographic dividend will result in more workers entering the labor force in the future and the region will need to add between 1 and 1.2 million additional jobs every month for the next twenty years. Creating jobs for them will contribute to growth, equity and peace in the region. The Bank produced a regional flagship, More and Better Jobs in South Asia, on how more and better jobs can be created in the region where there is a concern that job creation has been mostly in the informal sector characterized by low skills and low earnings. To strengthen our understanding of the policies conducive to inclusive growth, the South Asia region is working on a new flagship on Equity for Development where inequality in income and consumption will be studied alongside inequality of access and opportunities. The Bank has also strengthened its focus on promoting a multisectoral agenda to tackle the severe nutrition problems in the South Asia region, and on mainstreaming gender issues into its operations.

Regional Cooperation

Regional economic cooperation holds the potential for considerable gains in growth and increased security for South Asia region. The strategy for regional cooperation rests on five main pillars: Build on emerging view in the region that regional cooperation is key to being part of the Asian Century; Support regional networks to promote cooperation by sharing information, and  building institutional capacity through analysis, dialog, and capacity building; Focus on trade in goods, services and electricity, people to people contact and cooperation in water resources management among Bangladesh, Bhutan, India, Pakistan and Nepal; Strengthen regional cooperation in wildlife protection, water resource management, food security and disaster risk management; Leverage partnerships including DFID, AusAid, South Asia Water Initiative, South Asia Food and Nutrition Security Initiative, Central Asia Water & Energy Development Program. 

Conflict and Post-conflict Areas

According to the recent study jointly prepared by the Bank and the Government of Afghanistan entitled Transition in Afghanistan: Looking Beyond 2014, the full assumption of Afghan responsibility for security by end-2014, the drawdown of most international military forces and the likely reduction in overall assistance—will have a profound impact on Afghanistan’s economic and political landscape, extending well beyond 2014. Political uncertainty and insecurity could undermine Afghanistan’s transition and development prospects. The extremely high level of current annual aid (estimated at $15.7 billion in 2010) is roughly the same dollar amount as Afghanistan’s GDP and cannot be sustained.

With population growth at 2.8 percent, Afghanistan needs strong economic growth to reduce poverty and improve development outcomes. A growth rate of 6 percent a year would be required to double Afghanistan’s per capita GDP in about 22 years (in about a generation).

Achieving Results

World Bank support has helped South Asia achieve the following results:

  • Afghanistan: School enrollment increased from 1 million to 7 million children
  • Bangladesh: 10 million rural households provided with access to electricity (grid or solar)
  • India: 25 million rural people benefited from rural water supply and sanitation projects in past 15 years
  • Nepal: 1.2 million people with improved water supply
  • Pakistan: 1.9 million micro-credit loans made to communities
  • Sri Lanka: 620 km of roads rehabilitated

Media Contacts:
Alison Reeves (202) 473-8955, E-mail: areeves@worldbank.org
Gabriela Aguilar (202) 473-6768, E-mail: gaguilar2@worldbank.org


Last updated: 2011-03-16




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