South Asia Current Affairs - 2019

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South Asia Economic Focus, Making (De)Centralization Work Report: World Bank

As per the report released by World Bank on ‘South Asia Economic Focus, Making (De)Centralization Work’, Bangladesh has become the second-fastest growing economy in South Asia after Bhutan. According to the World Bank, Bangladesh and Nepal are estimated to grow faster than India in 2019.

The latest edition of this World Banks’s report finds that strong domestic demand, which support high growth in past, has weakened, driving a slowdown across the south Asian region.

Key Highlights of Report

The overall growth in South Asia is projected to slow down this fiscal in line with a global downward trend. Growth in South Asia is projected to fall to 5.9% in 2019, down 1.1% points from April 2019 estimates, casting uncertainty about a rebound in short term.

In India, growth is projected to fall to 6% this fiscal year and is then expected to gradually recover to 6.9% in fiscal year 2021 and to 7.2% in 2022.

The growth rate of Pakistan is projected to decrease further to 2.4% this fiscal year, as monetary policy remains tight, and planned fiscal consolidation will further compress domestic demand.

As per the report, the GDP growth rate of Bangladesh is projected to moderate to 7.2% this fiscal year and 7.3% in 2020. The country’s economy is likely to maintain growth above 7%, supported by a political stability, robust macroeconomic framework, and strong public investments.

In 2018 Bangladesh has reduced current account deficit due to rising export and remittances which was above $15.5 billion. However, the report indicates that the financial sector vulnerability, fiscal pressures and loss of external competitiveness pose challenges to its growth rate.

Moreover, despite slowdown in industrial growth rate, the industrial sector remains strong as Bangladesh’s garment industry benefited immensely from trade tensions between United States and China.

The World Bank report suggests Bangladesh to address key structural challenges such as reducing infrastructure deficit, improving urban management, managing climate change risks and enhancing human capital.

World Investment Report 2019: UNCTAD

According to the World Investment Report 2019, released by United Nation Conference on Trade and Development (UNCTAD), Foreign Direct Investment (FDI) inflows to India grew by 6% to USD 42 billion in 2018. India was ranked among the top 20 host economies for FDI inflows in 2017-18.

Key Findings of Report

FDI to India: It grew by 6% to $42 billion in 2018 saw strong inflows in manufacturing, financial services sectors, communication and cross-border merger and acquisition activities.

FDI inflow to South Asia: It increased 3.5% to $54 billion dollars. It highlighted that the prospects for FDI inflows into South Asia are largely determined by expectations of growing investment into India. India has historically accounted for 70% to 80% of inflows that came to the South Asian region. Among other countries in South Asian region, FDI flows to Sri Lanka and Bangladesh rose to record level, to $1.6 billion and $3.6 billion respectively, but Pakistan witnessed a 27% decline in investment to $2.4 billion.

About UNCTAD

It was established in 1964 for integrated treatment of trade and development and related issues in areas of investment, finance, technology, enterprise development and sustainable development. It is organ of UN General Assembly (UNGA). There are 195 members in UNCTAD. Its mandate is to maximize trade, investment and development opportunities of developing countries and assist them in their efforts towards integrating into world economy on an equitable basis without any bias.