Sri Lanka’s growth is expected to pick up to about 4.7% in 2017 and accelerate to 5.1% by 2019, as the IMF-supported program helps improve macroeconomic resilience according to a new World Bank report
Reforms initiated by the World Bank Development Policy Operation in 2016 are expected to reduce obstacles to private sector competitiveness in the medium-term and help in attracting FDIs. Resumption of the Generalized System of Preferences Plus (GSP+) trading arrangement with the European Union will boost its export sector.
In Sri Lanka, a resumption of Chinese-funded investment and infrastructure projects such as the Colombo International Financial Centre has lifted private investment and FDI inflows; in addition, fiscal consolidation under an IMF program has helped improve investor sentiment.
Regional growth is forecast to increase to 6.8% in 2017 and to strengthen to an average of 7.2% in 2018-19, reflecting a solid expansion of domestic demand and exports Excluding India, regional growth will remain broadly stable at an average of 5.8% in 2017-19, as easing growth in Bangladesh and Nepal offset gains in Bhutan, Pakistan, and Sri Lanka.
Robust domestic demand, an uptick in exports, and strong foreign direct investment inflows underpin this forecast. Domestic risks to the outlook include policy uncertainty related to upcoming elections and possible setbacks to reform progress. External risks include an increase in global financial volatility, a slowdown in remittances inflows, and rising geopolitical tensions.
The regional forecast assumes that monetary policy across South Asia countries remains broadly accommodative, encouraging credit to the private sector; that fiscal policy tightens slightly to curb the increase in public debt; and that political tensions and insecurity abate.
India’s growth is forecast to increase to 7.2% in FY2017 (April 1, 2017 - March 31, 2018) and accelerate to 7.7% by the end of the forecast horizon-slightly below previous projections.
Pakistan’s growth is expected to increase to 5.2% in FY2017 (July 1, 2016 - June 30, 2017) and remain strong over the forecast horizon, reflecting an upturn in private investment, increased energy supply, and improved security.
Growth in Bangladesh is forecast to remain robust, averaging 6.6% during FY2018-FY2020.
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