July 18, Colombo (LNW): Sri Lanka’s economic performance in the first quarter of 2024 has outperformed the projections made in the April 2024 Asian Development Outlook (ADO), the Asian Development Bank (ADB) reported.
The report indicates that inflation expectations for South Asia have been adjusted upwards to 7.1 per cent for 2024, while the forecast for 2025 remains at 5.8 per cent.
Although inflation predictions for Bhutan, India, and Pakistan for the financial years 2024 and 2025 remain unchanged from the April 2024 ADO, the projections for Bangladesh and Maldives have been revised upwards to double digits and 3 per cent, respectively.
In Nepal, average inflation has eased to 5.8 per cent. Pakistan continues to experience the highest inflation rate in South Asia at 23.06 per cent.
Conversely, Sri Lanka’s inflation forecast for 2024 has been significantly revised down to below 2 per cent, a remarkable improvement from 70 per cent two years ago, attributed to better supply-side conditions, enhanced external buffers, and increased availability of foreign currency.
However, the growth forecasts for Sri Lanka for 2024 and 2025 remain unchanged due to uncertainties associated with the upcoming election cycle.
Economic growth in developing Asia accelerated at the beginning of the year, buoyed by a relatively stable global economy. The region experienced robust growth in the first quarter of 2024, driven by strong export growth and solid domestic demand.
For the forecast period, GDP growth reductions in Bangladesh and Maldives are balanced by upward revisions for Bhutan, Nepal, and Pakistan, maintaining the region’s 2024 growth forecast at 6.3 per cent. The Maldives’ growth forecasts for 2024 and 2025 have been lowered due to underperformance in the construction sector and lower-than-expected growth in the fisheries sector.
Bhutan’s GDP growth forecast for 2024 has been revised upwards due to a larger-than-expected government budget and improved tourism prospects.
Nepal’s GDP projection for the financial year ending in mid-July 2024 has also been revised upwards, thanks to stronger-than-anticipated growth in agriculture and services.
Pakistan’s provisional government estimate of GDP growth for the financial year ending 30 June 2024 stands at 2.4 per cent, driven by robust agricultural output due to favourable weather conditions and government subsidies.
Afghanistan’s economy shows signs of recovery, but it remains fragile due to a weak investment climate, tight fiscal constraints, and declining international humanitarian support.
India’s economy is on track to grow by 7.0 per cent in the financial year 2024 and 7.2 per cent in 2025, as predicted in the April 2024 ADO.
The service sector continues to expand robustly, with the industrial sector expected to grow driven by manufacturing and strong demand for construction.
The growth forecast for South Asia remains steady at 6.3 per cent for 2024, with a slight decrease to 6.5 per cent for 2025.
Despite individual country changes, growth forecasts for Southeast Asia remain at 4.6 per cent in 2024 and 4.7 per cent in 2025, while the Pacific is expected to grow by 3.3 per cent in 2024 and 4.0 per cent in 2025.
East Asia’s 2024 growth projection is revised upwards to 4.6 per cent, driven by strong semiconductor exports and the artificial intelligence boom, with the 2025 projection remaining at 4.2 per cent.
The Caucasus and Central Asia’s growth outlook is revised up to 4.5 per cent from 4.3 per cent for 2024, and to 5.1 per cent from 5.0 per cent for 2025.
Interest rates in the United States and other advanced economies continue to influence the outlook, which faces several downside risks.
These include uncertainty regarding the United States election outcome, elevated geopolitical tensions, trade fragmentation, property market vulnerabilities in the People’s Republic of China, and weather-related events.
