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Sri Lanka’s economic growth is projected to grow at 5.0 percent in 2017, up from 4.8 percent 2016 and driven by increased private consumption and postponed investment in 2015, a new World Bank report said last week.

“It is imperative for Sri Lanka to expedite high priority structural reforms to increase competitiveness, improve governance and consolidate its fiscal balance in order to ensure sustained growth and development,” the twice-a-year, South Asia Economic Focus, said.
Accordingly, South Asia has defied a sluggish world economy and solidified its lead as the fastest growing region in the world in 2016 led by solid performance in India. However, the World Bank projected economic growth to gradually accelerate from 7.1 percent in 2016 to 7.3 percent in 2017.

The WB said the region remains a global growth hotspot and has proven resilient to external headwinds such as China’s slowdown, uncertainty around stimulus policy in advanced economies, and slowing remittances. The main challenges remain domestic, and include policy uncertainty as well as fiscal and financial vulnerabilities.

“A reality check reveals that private investment – a key future growth driver across South Asia – is yet to be ignited to sustain and further increase economic growth,” said Annette Dixon, World Bank South Asia Region’s Vice President. “Countries will need to activate the full potential of private investment and exports to accelerate economic activity further, reduce poverty and boost prosperity.”

Given its weight in the region, India sets the pace for South Asia as a whole. Its economic activity is expected to accelerate to 7.7 percent in 2017, after maintaining a solid 7.6 percent in 2016.

A reality check on the state of private investment in South Asia shows that the region has fallen short of expectations. Mobilizing domestic savings remains key at the aggregate level. However, remittances and foreign direct investment prove very effective on a per-dollar basis, and the region should make the most of them, the report added.