SAARC Economic Tracker, Q2 2018

Description

The SAARC Economic Tracker, a quarterly deliverable, is designed to help organizations track macroeconomic indicators across SAARC countries- Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The Q2 2018 Tracker includes short-term as well as long term forecasts across the areas of economy, commerce, demography, and trade, for the period 2016-2021 and Q1 2016- Q4 2021 (as applicable).

Gross Domestic Product (GDP) growth across most of the South Asian Association for Regional Cooperation (SAARC) countries, including Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka, was quite strong in the first few months of 2018 and is expected to remain stable in the coming months of the year. Growth slightly decelerated in 2016 and 2017 primarily due to weaker activity in India following demonetization and the introduction of the goods and services tax (GST).

Afghanistan: Continued political uncertainty, with scheduled parliamentary elections in 2018 and presidential elections in 2019, is likely to subdue economic activity in 2018 and 2019, with growth only expected to gain some momentum from 2020 onwards.

Bangladesh: GDP growth is expected to remain over 7.0% over the medium term supported by stronger exports and the strengthening in remittance inflows. The trade deficit situation is expected to expand driven by factors such as increased oil prices and higher imports of construction materials for large infrastructure projects.

Bhutan: The economic growth for Bhutan has remained strong, hovering at around 6 percent in recent years, driven by hydropower construction and services. Growth is expected to continue to remain strong while likely to cross 10.0% by 2020, primarily driven by the commissioning of new hydropower projects. To reduce over dependence on hydropower, Bhutan is looking to expand sector sectors such as tourism, food processing, and handicrafts.

India: India's GDP growth weakened in 2016/17 and 2017/18, chiefly owing to a demonetization exercise that creating short term cash shortages and the GST rollout. From 2018/19 onwards, economic growth is expected to accelerate driven by public investments, structural reforms and strong domestic demand.

Maldives: Maldives, an economy primarily driven by tourism and exports of fish, is expected to maintain stable growth in 2018, driven by the strong inflow of European and South East Asian visitors. The fiscal deficit widened in 2016 due to significant infrastructure spending but is expected to be contained in the 2018 – 2021 period.

Nepal: Real GDP growth continues to recover after slowing to 0.59 percent in 2015/16 due to devastating earthquakes and trade disruptions at the southern border. Aided by the decline in food prices, inflation during Q2 2017 – Q1 2018 decelerated to a multi-year low. With improved prospects of a stable government and expected stabilization of inflation, economic growth is expected to remain fairly stable over the medium term.

Pakistan: Pakistan is expected to register recovery in economic growth with controlled inflation during the forecast period, supported by the significant devaluation of the rupee undertaken in March 2018.

Sri Lanka: The Sri Lankan economy experienced sharp contraction in GDP growth in 2016 due to drought related supply shocks to agricultural production, with production dampened in 2017 as well by floods. Food inflation that spiked in 2017 is expected to stabilize by the end of 2018 supported by the government’s commitment to reforms and an expected rebound in the agriculture sector.