Bangladesh’s economy will grow faster than all South Asian countries except for Bhutan in the current fiscal year, says the World Bank (WB).
In its latest report titled “South Asia Economic Focus, Making (De) Centralisation Work”, the WB also projects a 7.2% GDP growth for the country for the current FY 2019-20 and 7.3 % for the next fiscal.
“The outlook is clouded by rising vulnerability in the financial sector, but the economy is likely to maintain growth above seven percent, supported by a robust macroeconomic framework, political stability, and strong public investment,” the report said.
The WB report also forecasts that Bangladesh’s economy would grow at a faster pace than India, Nepal, Sri Lanka, Pakistan, the Maldives and Afghanistan.
It said Bhutan’s GDP growth will remain faster than all the South Asian countries. In fiscal year 2019-20,Bhutan’s GDP will grow 7.4 %.
In India, after the broad-based deceleration in the first quarters of this fiscal year, growth is projected to fall to six percent this fiscal year that ending in March next year.
The growth is expected to gradually recover to 6.9 percent in the fiscal year 2020-21 and to 7.2 percent in the following year.
Pakistan’s growth is projected to deteriorate further to 2.4 percent this fiscal year.
In Sri Lanka, the growth is expected to soften to 2.7 percent in 2019.
In the Maldives, growth is expected to reach 5.2 percent in 2019 and in Nepal, GDP growth is projected to average 6.5 percent over this and next fiscal year.
Afghanistan is expected to recover and reach three percent in 2020 and 3.5 percent in 2021.
In line with a global downward trend, the growth in South Asia is projected to slow to 5.9 percent in 2019, down 1.1 percentage points from April 2019 estimates, casting uncertainty about a rebound in the short term.
The report finds the strong domestic demand, which propped high growth in the past, has weakened, driving a slowdown across the region.
“Declining industrial production and imports, as well as tensions in the financial markets, reveal a sharp economic slowdown in South Asia,” said Hartwig Schafer, vice president of the World Bank for South Asia, in a statement.
“As global and domestic uncertainties cloud the region’s economic outlook, South Asian countries should pursue stimulating economic policies to boost private consumption and beef up investments.”
In a focus section, the report highlights how their economies become more sophisticated, South Asian countries have made decentralization a priority to improve the delivery of public services.
With multiple initiatives underway across the region to shift more political and fiscal responsibilities to local governments, the report warns, however, that decentralization efforts in South Asia have so far yielded mixed results.
For decentralisation to work, central authorities should wield incentives and exercise quality control to encourage innovation and accountability at the local level.
Rather than a mere reshuffling of power, the report calls for more complementary roles across all tiers of government, in which national authorities remain proactive in empowering local governments for better service delivery.
“Decentralisation in South Asia has yet to deliver in its promises and if it is not properly managed it can degenerate into fragmentation,” said Hans Timmer, chief economist of the WB for South Asia.
“To make decentralisation work for their citizens, we encourage South Asian central governments to allocate their resources judiciously, create incentives to help local communities to compete in integrated markets and provide equal opportunities to their people,” he said.