Growth in South Asia is anticipated to rise to 6.4 percent this year, surpassing earlier predictions and positioning the region as the fastest-growing globally. The World Bank's latest regional outlook suggests that increasing women's participation in the workforce and enhancing global trade and investment could further accelerate growth.
The South Asia Development Update, titled "Women, Jobs, and Growth," forecasts a broad-based recovery driven by strong domestic demand in India and quicker recoveries in other South Asian nations. Growth is projected to remain robust at 6.2 percent annually over the next two years.
However, this forecast faces risks such as extreme weather, debt distress, social unrest, and potential policy missteps like delays in planned reforms. Fragile fiscal and external positions offer little buffer against these challenges.
"South Asia’s outlook is undoubtedly promising, but the region could do more to realize its full economic potential," stated Martin Raiser, World Bank Vice President for South Asia. He emphasized that integrating more women into the workforce and removing barriers to global investment can accelerate growth. "Our research shows that raising female labor force participation rates in the region to those of men would increase regional GDP by up to 51 percent."
Currently, female labor force participation in South Asia is among the lowest worldwide. In 2023, only 32 percent of working-age women were part of the labor force compared to 77 percent of men. For all South Asian countries except Bhutan, female participation rates were significantly lower than those in similarly developed countries.
Franziska Ohnsorge, World Bank Chief Economist for South Asia, noted: "South Asia’s female labor force participation rate of 32 percent is well below the 54 percent average in emerging market and developing economies." She called for a multi-pronged effort involving governments, private sectors, communities, and households.
The report recommends legal reforms for gender equality, measures to boost job creation, and removal of barriers such as lack of safe transport and quality childcare. It also highlights increasing trade openness as crucial for spurring growth and boosting job creation for women.
Economic outlooks have been upgraded for most South Asian countries except Bangladesh and Maldives. Bangladesh's growth is expected to slow due to uncertainties affecting investment and industrial growth. Bhutan anticipates a 7.2 percent growth boosted by tourism recovery and public investment. India's growth is projected at 7.0 percent with contributions from agricultural output and employment policies fostering consumption growth.
In Maldives, modest output growth of 4.7 percent is expected if debt repayments are rescheduled. Nepal's growth is set to pick up amid an expanding hotel sector and growing tourist arrivals. Pakistan's economy continues recovering with import control relaxations lifting growth prospects to 2.8 percent. Sri Lanka expects a rebound with a projected output growth of 3.5 percent if debt restructuring stays on track.