WB expects 4.6% growth rate in South Asia

By A Staff Reporter

KATHMANDU, Dec. 11: The recent global economic slowdown, adverse weather conditions and internal and external security concerns reduced growth figures for the South Asian Region in 2002. Growth in the region is expected to average 4.6 per cent for the year, a downward revision from the Global Economic Prospects-2002 forecast of 5.3 per cent GDP growth.

After exceptionally slow growth in 2001 (1.1 per cent) and 2002 (1.7 per cent), global Gross Domestic Product (GDP) is now expected to rise by 2.5 per cent in 2003. It is still well below the 3.9 per cent expansion recorded in 2000 and significantly below long-terms potential growth rates. There is a significant risk that the global rebound might quickly lose momentum and that the world could slip into recession, according to the World Bank.

A new World Bank study warns that economic growth will be slower than previously anticipated, for next 12 to 18 months and that this will impede poverty reduction in developing countries. According to the report "Global Economic Prospects and the Developing Countries 2003: Investing to Unlock Global Opportunities," uncertainties in global financial markets have sapped the momentum of the modest recovery that began in late 2001.

The World Bank report has stated that the South Asia region should average 5.4 per cent growth in 2003, an increase from the expected 4.6 per cent average for 2002. This improvement in growth prospects is premised upon a return to normal weather patterns, an improvement in political stability and regional security aspects thereby facilitating faster implementation of reforms and a recovery in world trade volumes. However, without adequate reforms, the downside risks are substantial, the WB reports reveal.

Releasing the Global Economic Prospects from New Delhi today, Dominique van der Mensbrgghe, Senior Economist, Development Prospect Group said that the recent global economic slowdown, adverse weather conditions and internal and external security concerns reduced growth figures for the South Asian Region in 2002. Growth in the region is expected to average 4.6 per cent for the year, a downward revision from the Global Economic Prospects-2002 forecast of 5.3 per cent GDP, he spoke to the media people of Nepal, Bangladesh and India.

Dominique said that the new trade policy of the United States and EU would have a positive impact on the economy of the developing nations across the world. Responding to queries of media people he said "Foreign direct investment and open market will certainly boost economic growth of the Least Developed Countries (LDCs) of Africa and Asia."

For South Asia, our global projections of recovery in world trade prospects also translate into strengthening external demand. We forecast, in our long-term prospect, that trade liberalisation is expected to continue with the easing of tariff and non-tariff barriers across the region. Further liberalisation, combined with the recovery in global demand, would spur export growth and positively impact trade balances in the region, the WB report states.

The World Trade Organisation (WTO) ministers plan to review progress at the next global trade summit in Cancun Mexico, in September 2003. The summit could provide strong impetus for joint action on the core issues affecting developing countries, the report further mentions. A slowdown in the global recovery is focussing the attention of economic policy makers on short-term measures to ensure a strong and sustained recovery. While these efforts are important they should not distract the international community from the pressing need to remove barriers to trade and investment that hurt poor people in developing countries.

Sadiqu Ahmed, Chief Economist of WB was quoted as saying that "This improvement in growth prospects is premised upon a return to normal weather patterns, an improvement in political stability and regional security aspects thereby facilitating faster implementation of reforms and a recovery in world trade volumes."