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South Asia is poised for robust growth in 2024, with a projected GDP growth of 6.0%, primarily driven by India’s strong performance and recoveries in Pakistan and Sri Lanka. However, despite this positive outlook, persistent structural challenges threaten to impede sustained growth and hinder the region’s ability to create jobs and respond to climate shocks, as highlighted in the World Bank’s latest South Asia Development Update.

While South Asia is expected to maintain its status as the fastest-growing region globally for the next two years, the report warns that the current growth trajectory is deceptive. Most countries are still below pre-pandemic growth levels, relying heavily on public spending to fuel economic expansion. Private investment growth has notably slowed across all South Asian nations, exacerbating the challenge of job creation amidst a rapidly expanding working-age population.

Martin Raiser, World Bank Vice President for South Asia, cautions that fiscal vulnerabilities and escalating climate shocks loom as potential threats to the region’s growth trajectory. To fortify resilience, he emphasizes the necessity of implementing policies to stimulate private investment and foster employment growth.

South Asia’s demographic dividend presents both opportunities and challenges. Despite a surge in the working-age population, employment growth has lagged behind, resulting in a declining employment ratio compared to other emerging market regions. Franziska Ohnsorge, World Bank Chief Economist for South Asia, emphasizes that fully harnessing this demographic dividend is imperative for the region’s economic advancement, with the potential for output to increase significantly if employment levels mirror those of comparable economies.

The report underscores the urgency of addressing weak employment trends, particularly in non-agricultural sectors, through policy interventions aimed at enhancing firm growth and facilitating job creation. Recommendations include measures to enhance trade openness, improve access to finance, strengthen business climates, and promote women’s economic participation, which collectively can boost growth, productivity, and resilience.

In addition to providing a comprehensive overview of South Asia’s economic landscape, the report offers country-specific outlooks. Bangladesh faces challenges posed by high inflation and trade restrictions, while Bhutan anticipates growth supported by electricity production and tourism. India’s economy is expected to maintain robust growth, while Maldives adjusts to shifting tourism dynamics. Nepal foresees growth driven by hydropower exports, and Pakistan anticipates economic recovery as business confidence improves. Sri Lanka expects modest growth supported by improvements in reserves, remittances, and tourism.

In conclusion, while South Asia’s growth prospects are promising, addressing structural challenges is essential to ensuring inclusive and sustainable development in the region.

Baltimore, MD – U.S. exports are expected to grow by $88 billion or 5 percent, in 2015, despite tepid global GDP growth, according to a research report just released by trade credit insurance provider, Euler Hermes.

According to the company’s latest Economic Insight report, the U.S.’s biggest export gains in 2015 will come from Canada, China and Mexico.

The report also projects strong export increases to smaller countries in Asia, Latin America and the Middle East, “reflecting recent rapid growth in these emerging markets, while also providing the U.S. with more diversification in its export composition.”

Export gains will primarily come from the agrifood, chemicals, energy and mechanical sectors. Textiles and ferrous metals show the smallest increases as the U.S. has become a much smaller player globally within these industries.

As U.S. energy companies are expected to start exporting natural gas globally by the end of 2015, revenues from this sector could be significant, growing from $16 billion in 2012 to $42 billion in 2040 or nearly 1 percent of GDP.

The planned 2016 expansion of the Panama Canal, which may double its capacity, “will also boost U.S. trade by allowing larger ships to carry exports from the U.S. through the canal, significantly reducing costs and making those exports more competitive.”

The U.S.’s largest trade deficit is with China, but several factors could shrink it, especially as China pivots toward a more domestically driven economy, and as the U.S. natural gas boon and favorable labor conditions have reduced China’s competitive wage advantage to the point that a growing number of companies are opting to ‘in-source’ their manufacturing.

In the coming year, the value of the U.S. dollar is expected to rise in 2015 making U.S. exports more expensive and less competitive with export financing faces several challenges, including tight lending conditions and risk-averse bankers.

Rising rates in 2015, the report says, “may make financing more costly and/or harder to obtain, especially given fragile global growth and geopolitical uncertainty.”

In addition, global business insolvencies “are expected to fall 3 percent, a much slower rate than 2014’s decrease of 12 percent.”

At the same time, insolvencies still remain 12 percent above 2007’s pre-crisis levels, meaning that exporters will need to continue stringently evaluating their partners for insolvency risk.

To further promote U.S. exports, two major trade agreements – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership – are currently being negotiated.

Both agreements are being structured to reduce the burden of Customs, regulations, tariffs and taxes, lower barriers to trade, and allow increased access to new markets.

“Demand for U.S. exports is, of course, dependent on the strength of the global economy,” said Dan North, senior economist for Euler Hermes Americas.

“While the global economy is set to enter its fourth straight year of lackluster growth, the U.S. economy continues to grow and many of our industrial sectors are showing strength both at home and abroad.”

12/11/2014

South Asia’s Growth Resilience Faces Structural Challenges

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