South Asia has regained its lead as the fastest growing region in the world, supported by recovery in India according to the World Bank, but the struggle by Sri Lanka is likely to persist with below 5% improvement being forecast.
World Bank said, with the right mix of policies and reforms, South Asia’s growth is expected to accelerate to 6.9% this year, and 7.1% in 2019.
In contrast, India’s 2018 growth is forecast at 7.3%, Bangladesh by 6.5% and Pakistan by 5.8%. For next year, India’s growth is tipped to be 7.5%, Bangladesh by 6.7% and Pakistan by 5%. For 2020, India will grow by 7.5%, Bangladesh by 7% and Pakistan by 5.4%.
The South Asia Economic Focus (SAEF) said Sri Lanka’s economic performance has been hurt by prolonged drought, but is expected to accelerate from 3.1% in 2017 to 4.8% in 2018. Forecast for 2019 and 2020 is 4.5%.
“Accelerating reforms to promote competitiveness, better governance and a more balanced budget are critical to ensure sustained growth and development. Every month, the working age population increases by 10,000 people, and Sri Lanka must create 63,000 jobs a year to maintain its employment rate,” it added.
The twice-a-year SAEF finds that the region could even extend its lead over East Asia and the Pacific. Much of the progress, however, is driven by India’s growth rebound and is not consistent across countries. Despite accelerating global growth and trade, exports remain weak. Progress on fiscal consolidation is slow and deficits are high.
The latest SAEF edition, titled “Jobless Growth”, argues that growth alone will not be enough to attain the higher employment rates enjoyed by other developing countries, especially among women.
“More than 1.8 million young people will reach working age every month in South Asia through 2025, and the good news is that economic growth is creating jobs in the region,” said World Bank South Asia Region Chief Economist Martin Rama. “But providing opportunities to these young entrants while attracting more women into the labour market, will require generating even more jobs for every point of economic growth.”
While the number of working age people is increasing, the fraction of working-age people who are at work has declined in most countries in South Asia based on employment data analysed from 2005 to 2015. Some decline was to be expected, as higher incomes allow households to prioritise education, health and other commitments, but the fall in employment rates in South Asia has been much faster than in East Asia. It has been particularly strong in India, Bhutan and Sri Lanka, especially for women, the report shows. With declining employment rates, the region is foregoing some of its potential demographic dividend.
To arrest further declines in employment rates, South Asian countries would need to create 11.7 million jobs a year, which is feasible if the current growth momentum of the region is sustained. But if South Asia wants to increase employment rates to the levels seen in other regions with similar income levels, it would need to create many more jobs. The focus should also be on better jobs, as regular wage employment remains the exception more than the norm.
“Growth is important, but even very high growth will alone not be enough to increase South Asia’s employment rate,” said report author Robert Beyer. “Policies and actions are needed to make growth more labour-intensive, especially to create the kinds of jobs that can encourage greater labour force participation by women.”