ADB cuts 2013 South Asian growth outlook

10 December 2012 02:55 am Views - 3453

The GDP growth of South Asian countries comprising of Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka for 2013 have been reduced from 6.4% to 6.2% while the growth outlook for 2012 has been cut to 5.3% from the previous estimated 5.5%. In 2011, the region grew by 6.2%.

According to the quarterly economic update by the Asian Development Bank (ADB) for July-September, this is due to the uncertain global environment and tight monetary policies adopted to combat domestic inflation that continues to pressure South Asian economies.

“The late and uneven monsoon will hurt agricultural production in India and Nepal. In Bangladesh, the growth projection for 2013 has been revised downward due to decelerating export growth. Domestic demand remains anemic as the central bank continues tightening monetary policy. In the Maldives, recent political turmoil, growing concern over increasing fiscal deficit, rising public debt, and the effect of the weaker European economy on tourism continued economic fragility.”, the report said.

India, the largest economy in the South Asian region remain sluggish due to the contraction in the industrial production which saw a YoY fall of 0.4% for the period. Further, the low growth of private consumption expenditure, weak agricultural income and fragile investment sentiments in the coming quarters have dragged the GDP growth projections to 5.4% from the previous 5.6% for 2012.

“Growth in 2013 has also been revised down from 6.7% to 6.5% as high deficit and inflation coupled with weak capital flows will make it difficult for the government to cut rates to boost the economy,” the report added.

However ADB continues to stick to the previous inflation projection of 7.4% for 2013 while the projection for 2012 has been revised downwards to 8.3% from 8.6% due to the continued downward trend in the international food price index in October.

“The decline is largely due to reduced international prices of oils/fats, specifically soybean and palm oil. Abundant supply of fats and vegetable oil, coupled with weak external demand, contributed to market cooling. Grain prices remained elevated, above last year’s level, as tight supply continued to support prices,” the report noted adding that food prices in 2013 were forecasted to grow 2% on the assumption of higher meat prices, lower grains production and higher demand as the global economy slightly improves.