The projections for 2024-25 are higher than expected in January, primarily because of an upward revision in investment growth by 0.9 percentage point, on an average, over these two years.
Growth in the region excluding India is expected to pick up to 3.9 per cent in 2024 and to 4.4 per cent in 2026.
In India, growth of 6.7 per cent per year, on an average, is projected for three fiscals beginning fiscal 2024-25 (FY25). Despite a moderation from a high base, investment growth is expected to be stronger than previously envisaged and remain robust over the forecast period, with strong public investment anticipated to be accompanied by private investment.
In Bangladesh, growth is projected to increase slightly to 5.7 per cent in FY25 and 5.9 per cent in FY26. In addition to an increase in private consumption because of easing inflation, the implementation of large investment projects will support a pickup in overall investment.
Growth is also projected to rise in Bhutan and Nepal, partly reflecting strong output in the hydropower sector. Strengthened activity in Maldives will be supported by the expansion of an international airport in 2025, the World Bank report noted.
Growth in Pakistan is expected to pick up to 2.3 per cent in FY25 (July 2024 to June 2025) and 2.7 per cent in FY26. It is expected that industrial activity and confidence will increase as a result of easing import restrictions and implementation of reform packages.
In Sri Lanka, the economy is expected to expand by 2.2 per cent this year and then reach 3 per cent in 2026, assuming successful debt restructuring negotiations and the implementation of structural reforms.
In contrast, the economy of Afghanistan is set to remain fragile, with high unemployment, food insecurity and poverty, the report said.
Downside risks to the baseline forecast for the region include commodity price spikes resulting from supply disruptions caused by the possible escalation of geopolitical tensions and intensification of armed conflicts.
In countries with elevated government indebtedness, abrupt fiscal consolidation could cause larger adverse effects on growth.
Some countries also run the risk of financial instability because of the large holdings of sovereign debt by domestic banks, the report added.
Fibre2Fashion News Desk (DS)