New Delhi: The World Bank on Thursday cut India’s growth forecast for this fiscal by a full percentage point and predicted a 9.5% contraction in crisis-hit Sri Lanka, as rising commodity prices and credit troubles hit economies in South Asia.
Growth projections for the region, including India, Pakistan, Afghanistan, Bangladesh, Sri Lanka, Nepal, Bhutan and the Maldives, were lowered to 5.8% in June from 6.8% forecast. India’s forecast was reduced from 7.5% to 6.5%.
The bank cited the impact of the war in Ukraine, which has pushed up commodity prices, and the region’s uneven recovery from the effects of the COVID-19 pandemic. It forecasts inflation in the sector to rise to 9.2% this year before gradually reducing.
“The uncertainty in private investment growth and higher financing costs are likely to ease, given that slowing global demand will impact the country’s exports,” the World Bank said in its bi-year report on South Asia.
Afghanistan has been excluded from the regional report since the Taliban came to power in August 2021 because it did not release national account data.
The region’s economy grew at 7.8% in 2021, when most of the pandemic was recovering from recession.
Last week, the Reserve Bank of India raised the benchmark repo rate by 50 basis points to 5.9% for a hike of 7% from an earlier estimate of 7.2%, as it struggles to control high inflation – 6. Seen to stay above %. at the beginning of 2023.
Regional economies were sharply affected by the COVID-19 pandemic, global liquidity fluctuations and commodity prices, as well as weather disasters.
“In the face of these shocks, countries need to build strong fiscal and monetary buffers,” said Martin Raiser, World Bank Vice President for South Asia, urging governments to use scarce resources to protect people.
The World Bank also urged governments to ease restrictions on labor movement by introducing flexible visa policies and supporting migrant workers to protect their long-term growth prospects. ,Reuters