According to the World Bank’s June 2017 Global Economic Prospects, Sri Lanka’s growth is forecast to accelerate to a 4.7 percent rate in 2017 and 5 percent in 2018, as international financial institution programs support economic reforms and boost private sector competitiveness.
The report indicates that South Asia as a region will pick up to 6.8 percent in 2017 and accelerate to 7.1 percent in 2018, reflecting a solid expansion of domestic demand and exports.
“Excluding India, regional growth is anticipated to hold steady at 5.7 percent, rising to 5.8 percent, with growth accelerating in Bhutan, Pakistan, and Sri Lanka but easing in Bangladesh and Nepal. India is expected to accelerate to 7.2 percent in fiscal 2017 (April 1, 2017 – March 31, 2018) and 7.5 percent in next fiscal year. Pakistan is expected to pick up to a 5.2 percent rate in fiscal 2017 (July 1, 2016 – June 30, 2017) and to 5.5 percent in the next fiscal year, reflecting an upturn in private investment, increased energy supply, and improved security,” the report said.
Furthermore, the World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies. Growth among the world’s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for growth in other emerging and developing economies and globally.
“For too long, we’ve seen low growth hold back progress in the fight against poverty, so it is encouraging to see signs that the global economy is gaining firmer footing,” World Bank Group President Jim Yong Kim said. “With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term. Countries must also continue to invest in people and build resilience against overlapping challenges, including climate change, conflict, forced displacement, famine, and disease.”
The report highlights concern about mounting debt and deficits among emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions might be damaging. At the end of 2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by more than 5 percentage points of GDP in one-third of these countries.
“The reassuring news is that trade is recovering,” said World Bank Chief Economist Paul Romer. “The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector.”
World Bank’s Development Economics Prospects Director Ayhan Kose said that the recent acceleration in activity in some of the largest emerging markets is a welcome development for growth in their region and for the global economy especially after a prolonged slowdown.
“Now is the time for emerging market and developing economies to assess their vulnerabilities and strengthen policy buffers against adverse shocks,” he added.