South Asia's GDP growth to slow to 4.8% in 2023: UN report

The outlook is more challenging for other countries in the region. In Pakistan, the economy is expected to expand by only 2.5 per cent in 2023, as devastating floods caused significant damages, particularly for agriculture, with spillover effects on related industrial and services sectors. Sri Lanka’s economy contracted by an estimated 9 per cent in 2022 and is likely to shrink by another 3.2 per cent in 2023, as per the UN World Economic Situation and Prospects (WESP) 2023 report.

Economic growth in East Asia is projected at 4.4 per cent in 2023, increasing from an estimated 3.2 per cent in 2022. The growth acceleration mainly reflects an improvement of the Chinese economy. Economic recovery overall, however, remains fragile. Many economies (other than China) in the region are losing steam amid fading pent-up demand, rising living costs, and weakening export demand from the US and Europe. Contractionary monetary and fiscal policies to curb inflationary pressures and rising fiscal challenges are expected to weigh on private consumption and investment.

China’s economy is projected to grow by 4.8 per cent in 2023, following a weaker-than-expected growth of 3 per cent in 2022. Recurring COVID-19 related lockdowns and prolonged stress in the real estate market delayed China’s recovery. Although the economy is forecast to accelerate with the government abandoning its Zero-COVID policy in late 2022 and easing of monetary and fiscal policies, a surge in COVID-19 infections implies a possible bumpy reopening path.

East and South Asia’s near-term economic prospects face a deteriorating global environment. Weaker external demand will slow manufacturing activities and investment in export-dependent economies. While the expected recovery of China’s economy should support growth across the region, a surge in COVID-19 infections in China may temporarily impede such an outcome.

Continued rate hikes in major developed countries could further tighten global liquidity, weaken domestic currencies, increase balance-of-payments vulnerabilities, and push up countries’ debt servicing costs. Existing high levels of sovereign debt and unsustainable debt-servicing burdens prompted several countries in South Asia to seek multilateral financial support. Climate risks are expected to continue affecting many countries in the region, adding further pressure on inflation.

According to the report, slower growth, coupled with elevated inflation and mounting debt vulnerabilities, threatens to further set back hard-won achievements in sustainable development, deepening the already negative effects of the current crises. A prolonged period of economic weakness and slow income growth would not only hamper poverty eradication, but also constrain countries’ ability to invest in the sustainable development goals (SDGs) more broadly.

Fibre2Fashion News Desk (DP)