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1、The Office of the Chief Economist of the South Asia RegionSouth Asia Development UpdateTaxing TimesAPRIL 2025South Asia Development Update APRIL 2025 South Asia Development Update 2025 International Bank for Reconstruction and Development/Te World Bank 1818 H Street NW,Washington,DC 20433 Telephone:

2、202-473-1000;Internet:www.worldbank.org Some rights reserved 1 2 3 4 28 27 26 25 Tis work is a product of the staff of Te World Bank with external contributions.Te findings,interpretations,and conclusions expressed in this work do not necessarily reflect the views of Te World Bank,its Board of Execu

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7、his work,including for commercial purposes,under the following conditions:AttributionPlease cite the work as follows:World Bank.2025.Taxing Times.South Asia Development Update(April 2025).World Bank,Washington,DC.doi:10.1596/978-1-4648-2230-8.License:Creative Commons Attribution CC BY 3.0 IGO Transl

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12、ents can include,but are not limited to,tables,figures,or images.All queries on rights and licenses should be addressed to World Bank Publications,Te World Bank,1818 H Street NW,Washington,DC 20433,USA;e-mail:pubrightsworldbank.org.ISBN(electronic):978-1-4648-2230-8 DOI:10.1596/978-1-4648-2230-8 Cov

13、er design:David Spours(Cucumber Design).Te cutoff date for the data used in the report was April 10,2025.v Summary of Contents Acknowledgments.xi Foreword .xiii Executive summary.xv Abbreviations.xvii Chapter 1 Spotlight Chapter 2 A Precarious Path:Building Resilience amid Uncertainty.1 Box 1.1 Bran

14、ching Out:The Economic Potential of South Asians Abroad.18 Clear the Way:Climate Resilience in South Asias Private Sector.33 Bridging the Gap:Revenue Mobilization in South Asia .61 vii Contents Chapter 1 A Precarious Path:Building Resilience amid Uncertainty.1 Introduction.3 Global developments and

15、outlook.4 Developments in South Asia.6 Country developments.7 Outlook for South Asia.10 Outlook for South Asian countries.11 Risks and vulnerabilities.12 Policy challenges.17 References.28 Acknowledgments.xi Foreword.xiii Executive summary.xv Abbreviations.xvii Clear the Way:Climate Resilience in So

16、uth Asias Private Sector.33 Introduction.35 Methodology.39 Impact of adaptation.42 Policy implications.44 Annex SL1 Methodology.45 References.54 References Annex Table SL1.57 Spotlight Bridging the Gap:Revenue Mobilization in South Asia .61 Introduction.63Features of South Asian revenue collection .

17、65 A gap that needs bridging.66 Policy options.71 Annex 2.1 Literature review:Tax buoyancies.79 Annex 2.2 Methodology:Stochastic Frontier Analysis.80 References.91 Chapter 2 viii 1.1 Overview .4 1.2 Global economic activity.5 1.3 Global financial conditions .6 1.4 Capital flows .7 1.5 Inflation and

18、monetary policy .8 1.6 Regional economic activity.9 1.7 Economic activity in South Asian countries 10 1.8 Severe global downturn.13 1.9 Policy uncertainty and financial stress.15 1.10 Official development assistance .16 1.11 Reform slippage .17 1.12 Government revenues.24 1.13 Agriculture and climat

19、e adaptation.25 B1.1 Migration trends and patterns .19 B1.2 Migrant skills .20 SL1 Climate risks in South Asia .36 SL2 Fiscal pressures in South Asia.37 SL3 Scenario assumptions .40 SL4 Impact of rising global temperatures:Autonomous adaptation .42 SL5 Impact of rising global temperatures:Directed a

20、daptation into agricultural research and development .43 SL6 Impact of rising global temperatures:Uncertainty about climate damage and public choice .44 2.1 Fiscal positions .64 2.2 Government revenues .65 2.3 Changes in tax revenues over the past decade .66 2.4 Tax rates and revenues .67 2.5 Tax ba

21、ses .68 2.6 Tax revenue shortfalls .69 2.7 Tax gaps 70 2.8 Tax reform priorities for South Asia.72 2.9 Revenue increases following policy reforms:Estimates from the literature .73 2.10 Pollution pricing .76 A2.1.1 Literature review:Tax revenue buoyancies.79 A2.2.1 Robustness checks on tax revenue sh

22、ortfalls.81 A2.2.2 Robustness check for governance quality .82 Figures Boxes 1.1 Branching Out:The Economic Potential of South Asians Abroad .18 ix Tables 1.1 Growth in South Asia.11 SL1 Literature review of climate damages .48 SL2 Country coverage .53 A2.1 Tax revenue buoyancies from the literature

23、 .84 A2.2 Personal income tax revenue.87 A2.3 Corporate income tax revenue.88 A2.4 Consumption tax revenue .88 A2.5 Trade tax revenue .89 A2.6 Governance quality .89 A2.7 Data sources of variables used in frontier analysis estimation analysis .90 xi Chapter 1 was prepared by Patrick Kirby,with contr

24、ibutions from Xiaoou Zhu,Laura Heras Recuero,Kaihao Cai,Yaoli Wang,and Issac Yurui Hu.Nikita Perevalov(DEC)provided the scenario analysis.Box 1.1 was prepared by Hagen Kruse and Zoe Xie.Colleagues from Prosperity and Economic Policy provided country forecasts,helpful comments,and other inputs to the

25、 report,including Mathew Verghis(ESADR),Shabih Ali Mohib(ESAC1),Hoon Sahib Soh(ESAC2),Udahiruni Atapattu(Sri Lanka),Erdem Atas(Maldives),Vincent Belinga(India),Derek Hung Chiat Chen(Pakistan),Ruijie Cheng(Maldives),Souleymane Coulibaly(ESADR),Sebastian Michael Essl(Nepal),Aroub Farooq(Pakistan),Rang

26、eet Ghosh(Bangladesh),Adnan Ashraf Ghumman(Pakistan),Mohini Gupta(India),Tobias Akhtar Haque(ESADR),Yumeka Hirano(Bhutan),Sharmin Akter Jahan(Bangladesh),Nayan Krishna Joshi(Nepal),Nazmus Sadat Khan(Bangladesh),Zi Cheng Kok(Bhutan),Aurelien Kruse(India),Naresh Kumar(India),Shruti Lakhtakia(Sri Lanka

27、),Cristian Lucas(ESAC1);Tanvir Malik(India),Abdoul Ganiou Mijiyawa(Nepal),Sayed Murtaza Muzaffari(Pakistan),Mohan Nagarajan(India),Arvind Nair(Sri Lanka),Mamadou Ndione(Afghanistan),Jedah Nyaboe Ogweno(Pakistan)Marcin Piatkowski(ESADR),Ruslan Piontkivsky(ESADR),Abdul Rahman Rahimi(Afghanistan),Dhruv

28、 Sharma(Bangladesh),Anna Twum(Pakistan),and Richard Walker(Maldives and Sri Lanka).Chapter 1 was also reviewed by Chetan Ghate(Indian Statistical Institute),Jim Rowe,Charles Collyns,and Graham Hacche(all former IMF).Box 1.1 incorporates feedback from Pablo Ariel Acosta(SPJ),aglar zden(DEC),Charles C

29、ollyns,Jim Rowe,and Graham Hacche(all former IMF).Chapter 2 was prepared by Hagen Kruse,Franziska Ohnsorge,Gabriel Tourek(University of Pittsburgh),and Zoe Xie,with contributions from Rabiul Hossain(Bangladesh Bank).Alan Auerbach(UC Berkeley),Gabriel Zucman(UC Berkeley,Paris School of Economics),Emi

30、lia Skrok(EMFTX),Pierre Bachas(DEC),Charles Collyns,Jim Rowe,Chris Towe(all former IMF)provided helpful comments.The spotlight was prepared by Weifeng Larry Liu,Warwick McKibbin(both Australian National University),Franziska Ohnsorge,and Siddharth Sharma.The spotlight incorporates comments from Step

31、hane Hallegatte(CCE),Jia Li(SCCFE)and the SCCFE team,Patrick Behrer(DEC),Charles Collyns(former IMF),Jim Rowe(former IMF),and workshop participants from DEC,INF,SD,and HD.Research assistance was provided by Kaihao Cai,Issac Yurui Hu,Isabella Masetto,Laura Heras Recuero,He Wang(DSO),Xinyi Wang,Yaoli

32、Wang,and Xiaoou Zhu.Rana Al-Gazzaz contributed to the reports preparation,production,and dissemination.Quinn Sutton Austin was responsible for the layout and typesetting.David Spours(Cucumber Design)designed the graphics and layout.Graeme Littler and Peter Milne copyedited the chapters.Elena Karaban

33、,Diana Ya-Wai Chung,and Trishna Thapa(all ECR)coordinated the dissemination.Ahmad Khalid Afridi and Neelam Chowdhry provided administrative support.South Asia as used in this report includes Afghanistan,Bangladesh,Bhutan,India,Maldives,Nepal,Pakistan,and Sri Lanka.The data cutoff date for this repor

34、t was March 21,2025.Acknowledgments This report is a product of the Office of the Chief Economist for the South Asia Region(SARCE).The report was managed by Franziska Ohnsorge(Chief Economist,South Asia Region),under the general guidance of Martin Raiser(Regional Vice President,South Asia Region).xi

35、ii The global economy is entering uncharted territory,presenting heightened challenges for South Asia.Trade is becoming less open,policy uncertainty is soaring,and downside risks are rising.Although the region continues to grow faster than any other region,its growth prospects are dimming.Forecasts

36、have been downgraded in almost all South Asian countries.Growth could be further set back by bouts of financial market turbulence,increasing trade restrictions,declining capital inflows,and reform setbacks.With an external environment presenting mounting risks,how can South Asia prepare for potentia

37、lly taxing times ahead?Tis report recommends that the region tackle some of its greatest vulnerabilities:fragile fiscal positions,susceptibility to climate damage,and a growing labor force with insufficient jobs.Because policy distortions and inefficiencies in these three areas are sizable,targeted

38、reforms would not only build resilience but also offer potentially large economic gains.Build fscal bufers:For most South Asian countries,increased domestic revenue mobilization is a prerequisite for strengthening fiscal positions and building resilience amid uncertainty.Compared with the average fo

39、r emerging market and developing economies,tax rates in the region are often higher and tax revenues lower.On average during 201923,South Asia collected government revenues totaling about 18 percent of GDPwell below the 24 percent average for emerging market and developing economies.But South Asian

40、countries have ample room to raise revenues by eliminating loopholes,streamlining tax codes,tightening enforcement,and facilitating tax compliance.Help the private sector in climate adaptation:South Asia is one of the most vulnerable regions to rising global temperatures.Because of the regions alrea

41、dy high average temperatures and high reliance on rain-fed agriculture,further warming will cause greater damage in South Asia than in other developing countries.But if allowed to respond flexibly,South Asias private sector could reduce about one-third of the climate damages by 2050.Countries can re

42、move obstacles that hinder households and firms from shifting across activities and locations.Leverage the benefts of migration:South Asias rapidly growing labor force is an economic opportunity if enough jobs can be created.Many will find jobs in South Asia while others may seek opportunities abroa

43、d.South Asias large diaspora can be a source of skills,entrepreneurship,investment networks and trade ties.Countries can harness their diasporas by negotiating bilateral agreements,incentivizing the return of migrants,and removing obstacles to investment and trade.Tree decades of robust growth throu

44、gh many ups and downs of the global economy have demonstrated the underlying strength of South Asias development path.By strengthening the most fragile parts of their economies,the countries of South Asia can chart a path through todays uncertainties,too.Martin Raiser Vice President,South Asia Regio

45、n Foreword xv Executive Summary Growth prospects for South Asia are dimming.The global economic environment has become more challenging and is a source of heightened downside risks.After a decade of repeated disruptions,South Asias buffers to cushion new shocks are slim.Tackling some of its greatest

46、 inefficiencies and vulnerabilities could help South Asia navigate this unusually uncertain outlook:unproductive agriculture sectors,pressures from rising global temperatures,and fragile fiscal positions.For most South Asian countries,increased revenue mobilization is a prerequisite for strengthenin

47、g fiscal positions.Even taking into account the particular challenges of collecting taxes in South Asian economiessuch as widespread informal economic activity and large agriculture sectorsSouth Asian economies face larger tax gaps than the average emerging market and developing economy(EMDE).This s

48、uggests the need for improved tax policy and administration.Until fiscal positions have strengthened,the burden of climate adaptation will disproportionately fall on the private sector.If allowed sufficient flexibility,private sector adaptation could offset about one-third of the likely climate dama

49、ge by 2050.This may,however,require governments to remove obstacles that prevent workers and firms from moving across locations and activities.As growth prospects dim,the challenge grows to create jobs for South Asias rapidly expanding working-age population.South Asias large diasporas could become

50、a source of strength if their knowledge,networks,and other resources can be better tapped for investment and trade.Chapter 1.A precarious path:Building resilience amid uncertainty.Growth prospects are dimming across South Asia.Tariffs,policy uncertainty,and financial market volatility have increased

51、 substantially.After an unexpectedly weak outturn of 6.0 percent in 2024,growth in South Asia is expected to soften further to 5.8 percent in 20250.4 percentage point below October forecastsbefore ticking up to 6.1 percent in 2026.The regions economies face heightened downside risks,including from a

52、 highly uncertain global landscape.After a decade of shocks,South Asian economies have limited capacity to cushion new ones.In particular,South Asias high debt remains a source of vulnerability to rising borrowing costs or declining funding inflows from private or official sources.The more challengi

53、ng global environment,combined with domestic fragilities,could be navigated more easily if the region tackled areas of particularly large inefficiency or vulnerability.Domestic revenue mobilization could lessen South Asias vulnerability to fiscal and external pressures.The regions unproductive agric

54、ulture sectors could benefit from more efficient pricing of inputs,as well as broader access to modern technologies and practices.Box 1.1.Branching out:The economic potential of South Asians abroad.Dimming growth prospects across South Asia amplify the challenge of creating jobs.Many in South Asias

55、rapidly growing workforce are likely to continue to seek opportunities abroad.Migrants from South Asian countriesmainly to countries outside the regionaccount for about 3 percent of South Asias working-age population.About one-half of them work in Gulf Cooperation Council countries,are typically low

56、-skilled,and on short-term contracts.Another one-quarter work in advanced economies and tend to be highly skilled and longer-term migrants.While the challenges of emigration have been well documented,South Asian countries large diasporas also bring economic benefits to the home countries,both while

57、workers are abroad and after they return homethrough remittances,improved skills,investments,and trade ties.Spotlight.Clear the way:Climate resilience in South Asias private sector.While South Asia has better growth prospects than other EMDE regions,it is also one of the regions that is most vulnera

58、ble to rising global temperatures and most affected by extreme weather events.Because of South Asias already high average temperature and reliance on rain-fed agriculture,rising global temperatures xvi could lead to output and per capita income losses by 2050 that are larger than those in the averag

59、e EMDE.Higher temperatures would cause large damage in the most vulnerable sectors,such as agriculture,but more limited damage in the most resilient sectors,such as services.About one-third of the total climate damage could be reduced if the private sector could flexibly shift resources across activ

60、ities and locations in response to these climate-induced changes in relative prices and incomes.Even South Asias fiscally constrained governments have scope to facilitate these shifts,including by expanding access to finance,improving transport and digital connectivity,and providing well-targeted an

61、d flexible social benefit systems.Chapter 2.Bridging the gap:Revenue mobilization in South Asia.South Asian governments need to raise revenues to shore up their fiscal positions.Although tax rates in South Asia are often above the EMDE average,most tax revenues are lower.On average during 201923,Sou

62、th Asian government revenues totaled 18 percent of GDPwell below the 24 percent of GDP average in EMDEs.Controlling for tax rates and the size of potential tax bases,tax revenues in the region are 17 percentage points of GDP below potential,with shortfalls in five of the regions eight countries larg

63、er than in the average EMDE.Revenue shortfalls are particularly pronounced for consumption taxes but are also sizable for personal income taxes and,in the larger economies,corporate income taxes.Weak revenue collection has only partly reflected country characteristics,such as widespread informal act

64、ivity outside the tax net and large agriculture sectors.Even after accounting for these characteristics of South Asian economies,sizable tax gaps remainhighlighting the need for improved tax policy and administration.There is scope to raise tax revenues by eliminating loopholes,streamlining tax code

65、s,strengthening enforcement,and facilitating compliance.The introduction of pollution pricing could also both boost revenues and help address the regions high pollution.xvii Abbreviations ACS ADV AEs AFG ASPI AUS BGD BRA BTN CAN CAPE CEP CEPII CHELEM CHN CIT COD COVID-19 CPI DSEX EAP ECA ECB EEM EMB

66、I EM-DAT EMDE EU EUW FAO FDI FOMC FRED FY GCC GCE GCSE GDP GED GL ICAP ICRG IDN IDOS American Community Survey Rest of Advanced Economies,containing Canada and New Zealand Advanced Economies Afghanistan All Share Price Index Australia Bangladesh Brazil Bhutan Canada Cyclically Adjusted Price-to-Earn

67、ings The Council on Economic Policies Centre dEtudes Prospectives et dInformations Internationales Comptes Harmoniss sur les Echanges et LEconomie Mondiale China Corporate income tax Chemical Oxygen Demand Coronavirus(SARS-CoV2)Consumer Price Index Dhaka Stock Exchange East Asia and Pacific Europe a

68、nd Central Asia European Central Bank Emerging Markets ETF Emerging Market Bond Index International Disaster Database Emerging Market and Developing Countries European Union Western Europe Food and Agriculture Organization Foreign Direct Investment The Federal Open Market Committee Federal Reserve E

69、conomic Data Fiscal Year Gulf Cooperation Council General Certificate of Education General Certificate of Secondary Education Gross Domestic Product General Educational Development Global International Carbon Action Partnership International Country Risk Guide Indonesia German Institute of Developme

70、nt and Sustainability xviii Abbreviations(continued)IEA IIF ILO IMF IND IPCC IPO JPN kg/ha KNOMAD KOR KSE 100 LAC LCOE LHS LKA MDV MEX MFN MNA MONA MPI MPO MSCI MWh MYS NEPSE NPISHs NPL NSE ODA OECD OLS OPHI PAK PHL PIT PM2.5 PMI R&D RCP RHS ROA S&P SAR International Energy Agency Institute of Inter

71、national Finance International Labour Organization International Monetary Fund India Intergovernmental Panel on Climate Change Initial Public Offering Japan kilograms per hectare Global Knowledge Partnership on Migration and Development Korea,Republic of Pakistan Stock Exchange Latin America and the

72、 Caribbean Levelized Cost of Energy Left hand side Sri Lanka Maldives Mexico Most-Favored-Nations Middle East and North Africa International Monetary Fund Monitoring of Fund Arrangements Multidimensional Poverty Index Macro Poverty Outlook Morgan Stanley Capital International Megawatt hour Malaysia

73、Nepal Stock Exchange Non-Profit Institutions Serving Households Nepal National Stock Exchange of India Official Development Assistance Organization of Economic Co-operation and Development Ordinary Least Squares Oxford Poverty and Human Development Initiative Pakistan Philippines Personal income tax

74、 Particulate Matter less than 2.5 micrometers in diameter Purchasing Managers Index Research and Development Representative Concentration Pathway Right hand side Rest of Asia Standard&Poors South Asia Region xix Abbreviations(continued)SFA SMA SPF SSA TADAT TFP THA UM UN UNCTAD UNFCCC UNU-WIDER USA

75、USAID USMCA VAT VIX VNM WHO WTO Stochastic Frontier Analysis Survey of Monetary Analysts Survey of Professional Forecasters Sub-Saharan Africa Tax Administration Diagnostic Assessment Tool Total Factor Productivity Thailand University of Michigan United Nations United Nations Trade and Development U

76、nited Nations Framework Convention on Climate Change United Nations University World Institute for Development Economics Research United States of America United States Agency for International Development United States-Mexico-Canada Agreement Value-added tax Chicago Board Options exchange volatilit

77、y index Viet Nam World Health Organization World Trade Organization CHAPTER 1A Precarious Path:Building Resilience amid UncertaintyCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 3 Chapter 1.A Precarious Path:Building Resilience amid Uncertainty Growth prospects are dimming across South Asia.Tari

78、ffs,policy uncertainty,and financial market volatility have increased substantially.After an unexpectedly weak outturn of 6.0 percent in 2024,growth in South Asia is expected to soften further to 5.8 percent in 20250.4 percentage point below October forecastsbefore ticking up to 6.1 percent in 2026.

79、The regions economies face heightened downside risks,including from a highly uncertain global landscape.After a decade of shocks,South Asian economies have limited capacity to cushion new ones.In particular,South Asias high debt remains a source of vulnerability to rising borrowing costs or declinin

80、g funding inflows from private or official sources.The more challenging global environment,combined with domestic fragilities,could be navigated more easily if the region tackled areas of particularly large inefficiency or vulnerability.Domestic revenue mobilization could lessen South Asias vulnerab

81、ility to fiscal and external pressures.The regions unproductive agriculture sectors could benefit from more efficient pricing of inputs,as well as broader access to modern technologies and practices.Introduction Global growth is showing signs of widespread weakness in 2025.Tariffs,policy uncertainty

82、,and financial market strains have increased substantially,and are weighing on activity(figure 1.1).In South Asia too,growth prospects are dimming.Growth outcomes for 2024 have disappointed and forecasts for 2025 have been downgraded for most countries in the region.Fiscal consolidation is expected

83、to continue,especially in countries implementing programs supported by the International Monetary Fund(IMF).South Asias growth was unexpectedly weak at 6.0 percent in 2024,and is expected to weaken further to 5.8 percent in 20250.4 percentage point below October forecastsbefore ticking up to 6.1 per

84、cent in 2026.After several years of synchronous decline,inflation dynamics have started to diverge across countries.Inflation rebounded in many countries in late 2024 and early 2025,and surveys point to increasing concerns about further acceleration.In South Asia,inflation differences across countri

85、es have widened,with Sri Lanka tipping into deflation and Bangladesh struggling with persistently above-target inflation.Global financial markets are increasingly affected by heightened policy uncertainty.Rising tariffs,shifting government priorities,and conflicting signals about the state of the ec

86、onomy have led to significant volatility in exchange rates,stock market valuations,and bond yields.A severe global downturn has become a possibility.Financial market movements in South Asia have been more muted than elsewhere,in part because of more limited direct exposures to the global economy and

87、 central bank interventions.Nonetheless,South Asian economies face heightened downside risks and,after a decade of shocks,their ability to cushion new shocks is limited.Large government debt stocks and below-average international reserves depress the credit ratings of South Asian countries and rende

88、r their economies vulnerable to financial stress.Half the countries in the region are undertaking reforms with IMF support.Failure to implement these reforms as planned could delay IMF financing,reignite capital outflows,and add to fiscal pressures.The region would also suffer slower growth if its e

89、xporters faced higher tariffs abroadalthough in the short term the slowdown would be less than in regions that are more open to foreign trade.The more challenging global environment,against the backdrop of domestic fragilities,could be navigated more easily if the region tackled some of the areas of

90、 particularly large inefficiency or vulnerability.Low revenues are at the root of South Asian countries fiscal fragilities;they could be increased by streamlining tax systems,better Note:This chapter was prepared by Patrick Kirby.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 4 FIGURE 1.1 Overvi

91、ew After a disappointing 2024,growth in South Asia is expected to weaken further in 2025 and tick up only slightly in 2026.The outlook is subject to downside risks,including from a potential global recession.The synchronous decline in global inflation has ended.Higher borrowing costs would add to fi

92、scal pressures,especially in South Asia where credit ratings are lower than in other EMDEs.Revenue mobilization will be critical to restore and preserve fiscal sustainability.A more dynamic non-agriculture sector could help raise labor productivity in agriculture,which is currently low by internatio

93、nal standards.Sources:Baker,Bloom,and Davis(2016);Eurostat;Fitch Ratings;FRED(database);Haver Analytics;Moodys Ratings;S&P Global;UNU-WIDER;World Bank Macro Poverty Outlook;World Bank Fiscal Survey(database);World Bank.Note:AEs=advanced economies;EAP=East Asia and Pacific;ECA=Europe and Central Asia

94、;EMDEs=emerging markets and developing economies;IND=India;LAC=Latin America and the Caribbean;MNA=Middle East and North Africa;SAR=South Asia;SSA=Sub-Saharan Africa.A.Real GDP-weighted(at 201019 average prices and market exchange rates)average real GDP growth rates for 8 South Asian economies and 1

95、39 other EMDEs.October 2024 forecasts exclude Afghanistan.B.Last observation is March 2025 for U.S.trade policy uncertainty,and January 2025 for world policy uncertainty.C.Median year-on-year inflation for each aggregate.Last observation is April 15,2025.D.Credit ratings from S&P,Moodys,and Fitch we

96、re mapped to a unified 122 scale(1=lowest,22=highest),and a simple average was computed for each country.The sample includes South Asian countries(Bangladesh,India,Maldives,Pakistan,Sri Lanka),South Asian program countries(Bangladesh,Pakistan,Sri Lanka),96 non-SAR EMDEs,and 40 non-SAR program countr

97、ies.Last observation is April 15,2025.E.Total revenue excludes grants.EMDE average is nominal GDP-weighted average of 140 EMDEs.Regions are nominal GDP-weighted average of country group.F.Annual averages from 2020 to latest available data.Sample includes 14 economies in EAP,22 in ECA,24 in LAC,17 in

98、 MNA,7 in SAR,and 38 in SSA.Bars show logarithm of real GDP-weighted ratio of real GDP in agriculture(at 201019 average prices and market exchange rates)relative to number of people employed in agriculture.A.Output growth B.Policy uncertainty C.Headline CPI inflation D.EMDE credit ratings 0100200300

99、40050060001,0002,0003,0004,0005,0006,000Mar-18Sep-18Mar-19Sep-19Mar-20Sep-20Mar-21Sep-21Mar-22Sep-22Mar-23Sep-23Mar-24Sep-24Mar-25U.S.trade policy uncertaintyWorld policy uncertainty(RHS)IndexIndex0246810Feb-20Aug-20Feb-21Aug-21Feb-22Aug-22Feb-23Aug-23Feb-24Aug-24Feb-25GlobalAEsEMDEsSARPercent024681

100、0SARNon-SAREMDEsSARprogramcountriesNon-SARprogramcountriesIndex345672024e2025f2026f2024e2025f2026f2024e2025f2026fSARSAR(excl.IND)Other EMDEsCurrent forecastOctober 2024 forecastPercentenforcing collection,and facilitating compliance.South Asias agriculture sector,which accounts for 16 percent of GDP

101、 but employs 42 percent of the workforce,suffers from particularly low labor productivity.A more efficient agriculture sector,combined with a more buoyant non-agriculture sector,could help shift workers,private finance,and government resources into more productive and climate-resilient activities.Gl

102、obal developments and outlook The U.S.administration announced new tariffs of 145 percent on imports from China,and 10 percent on most imports from the rest of the world(figure 1.2).Effective U.S.tariffs have increased to a level not seen in a century,and further tariff increases are a possibility.S

103、ome trading partners have responded with tariffs of their own on U.S.exports.In particular,China has raised tariffs on imports from the United States to 125 percent.Policy uncertainty has soared to unprecedented levels.The global economy grew steadily at 2.7 percent in 2023 and 2024,but consensus fo

104、recasts point to a sharp deceleration in global growth in 2025.Many major economies had already been expected to slow at the beginning of this year,but the degree of anticipated deceleration has increased significantly in recent weeks,according to most forecasters.Business and consumer confidence ha

105、ve fallen(figure 1.3).Global financial markets have been roiled by volatility.Stock market indexes have fallen sharply around the world,and measures of volatility have spiked,particularly in the United States.Many categories of borrowing cost have increased,with a notable uptick in yields on U.S.tre

106、asuries.Risk spreads on high yield debt,including both below investment-grade corporates and sovereigns,were generally narrow at the beginning of the year,but have expanded significantly in recent weeks.A growing share of debt has become distressed,and a growing share of borrowers have been locked o

107、ut of markets by prohibitive lending rates.The U.S.dollar and many EMDE currencies have depreciated,while other advanced-economy currencies have generally appreciated.This is E.General government revenues,201923 F.Agricultural value added per worker,2020s average 010203040ECAMNAEAPLACSSASARPercent o

108、f GDPEMDE average67891011LACMNAECAEAPSSASARLogarithm of U.S.dollars per employedCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 5 consistent with continued weakness in inflows of portfolio and foreign direct investment into EMDEs(figure 1.4).Prior to the introduction of new tariffs in April,globa

109、l inflation had leveled off,and national inflation was at or below target in about 60 percent of inflation-targeting economies(figure 1.5).Newly introduced tariffs will increase the price of many imported goods,however,and add to concerns about inflation that are increasingly apparent in surveys and

110、 financial market data.Inflation concerns are rising despite a sharp decline in oil prices;the Brent price stood at about US$75/bbl at the beginning of the year,but has fallen more recently.Central banks had already slowed their pace of monetary policy easing,and now face an increasingly challenging

111、 environment of rising prices and slowing growth.In the United States,the Federal Reserve cut its policy rate by a full percentage point between September and December 2024,but it has since kept it unchanged.The pace of future cuts is expected to be gradual,with policy rates staying well above their

112、 pre-pandemic levels.In the euro area,similarly,the pace of policy cuts by the European Central Bank is expected to slow sharply.In the United States,activity at the beginning of the year appeared robust,but more recent indicators point to a sharp slowdown in economic activity as a result of tariffs

113、,policy uncertainty,and the depletion of consumer savings.Some forecasters anticipate the economy will experience a recession(defined as two consecutive quarters of negative growth)in 2025.Consumer price inflation stood at 2.4 percent in March,slightly above the Federal Reserves 2 percent target,pri

114、or to the introduction of new tariffs in April.Growth in the euro area has been anemic,and consensus forecasts are for growth of around 1 percent in 2025 and 2026.Consumption and exports grew by about 1 percent in 2024,while investment contracted sharply.Consumer confidence has remained weak,despite

115、 growth in real incomes since the October edition of this report.In the areas largest economy,Germany,the manufacturing sector has contracted steadily since mid-2023 in the face of weak domestic FIGURE 1.2 Global economic activity Tariffs have been increased sharply.Policy uncertainty has increased

116、to historic highs.Forecasts for growth in several major economies in 2025 have been downgraded.Sources:Baker,Bloom,and Davis(2016);Budget Lab at Yale;CEIC;Consensus Economics;Haver Analytics;U.S.Bureau of Economic Analysis;WTO Tariff Analysis Facility;World Bank.Note:BGD=Bangladesh;BTN=Bhutan;IND=In

117、dia;LKA=Sri Lanka;NPL=Nepal;MDV=Maldives;PAK=Pakistan;RHS=right scale.A.“Existing tariffs”and“Tariffs on imports from U.S.”refer to effectively applied tariffs in 2023.“Additional tariffs”are the 10 percent tariffs imposed in April.B.2025 value is average effective tariff rate on April 15,2025,estim

118、ated by the Budget Lab at Yale.C.Last observation is March 2025 for U.S.trade policy uncertainty,and January 2025 for world policy uncertainty.D.Figure shows the evolution of GDP growth forecasts for 2025 from Consensus Economics.The April value for China is the moving average of latest changed fore

119、casts.Last observation is on April 15,2025.A.Current and additional tariffs B.U.S.tariff history C.Policy uncertainty D.Consensus expectations for growth in 2025 01020304050607018251845186518851905192519451965198520052025Percent010020030040050060001,0002,0003,0004,0005,0006,000Mar-18Sep-18Mar-19Sep-

120、19Mar-20Sep-20Mar-21Sep-21Mar-22Sep-22Mar-23Sep-23Mar-24Sep-24Mar-25U.S.trade policy uncertaintyWorld policy uncertainty(RHS)IndexIndex2.02.53.03.54.04.55.00.00.51.01.52.02.53.0Jan-24Apr-24Jul-24Oct-24Jan-25Apr-25U.S.JapanEuro areaChina(RHS)PercentPercent0102030BGDLKAPAKNPLINDBTN MDVAdditional tarif

121、fs on exports to U.S.Existing tariffs on exports to U.S.Tariffs on imports from U.S.Percentdemand,increased competition from EMDE exporters,and high energy prices.In China,domestic demand has been dampened by persistent weakness in the property sector.Mortgage lending has remained stagnant,and prope

122、rty prices had been declining for several years before a recent rebound.Consumer price inflation has remained well below the official target of 3 percent a year.The governments announcement of a stimulus package in September was followed by signs of recovery.Prior to the recent increase in tariffs,e

123、xports had been growing rapidly,largely offsetting weakness in domestic demand,so that output growth reached 5 percent in 2024,only slightly less than the 5.2 percent increase in 2023.For 202526,growth is expected to slow further as global trade tensions add to the continuing weakness in domestic de

124、mand.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 6 Growth in other emerging market and developing economies(EMDEs)has generally been healthy.Solid consumption and investment activity have been supported by continued monetary easing,growing real incomes,and strong industrial activity.High-freq

125、uency indicators,however,point to a deceleration in early 2025,especially in services activity.FIGURE 1.3 Global financial conditions Falling global confidence has coincided with falling stock market valuations in many countries,elevated volatility,and significant moves in exchange rates.Sources:CEI

126、C;Haver Analytics;Morgan Stanley;Trading Economics;World Bank.Note:AEs=advanced economies;BGD=Bangladesh;ECB=European Central Bank;EMDEs=emerging market and developing economies;EUR=Euro;EMDEs=emerging market and developing economies;IND=India;JPY=Japanese Yen;LKA=Sri Lanka;MSCI EM=Morgan Stanley Ca

127、pital International Emerging Markets Index;NPL=Nepal;PAK=Pakistan;PMI=purchasing managers index;VIX=Chicago Board Options Exchange volatility index.A.Sentix economic index and global composite PMI series show 3-month moving averages;for PMI,readings above(below)50 indicate expansion(contraction).Las

128、t observation is April 15,2025.B.Figure shows the changes of stock market price indexes since April 2,2025.Latest data for Bangladesh and Nepal is April 10,2025,for India and Sri Lanka is April 11,2025 and all others are April 14,2025.“USA”is the S&P 500(1941-43=10),“Euro area”is the S&P Euro(Dec-31

129、-97=1000),“PAK”is the KSE 100(Nov-91=1000),“BGD”is the DSEX(Jan-17-08=2951.91),“IND”is the NSE Nifty(Nov-3-95=1000),“NPL”is the NEPSE(Feb-12-94=100),and“LKA”is the ASPI(Jan-1-85=100).The last observation is April 15,2025.C.The VIX captures 30-day volatility of the S&P500.The EMDE VIX is 30-day volat

130、ility of returns on the MSCI EEM index.Last data point is from April 14,2025.D.Figure shows the change in value of currencies relative to the U.S.dollar since April 3,2025.The last observation is from April 11,2025 for all currencies.A.Global composite PMI B.Change in stock market valuations since e

131、arly April C.Financial market volatility D.Change in currency valuations relative to U.S.dollar since early April -9-7-5-3-11BGDNPLPAKINDLKAUSAEuro areaMSCI EMPercent01020304050202320242025U.S.VIXEMDE VIX2014-2019 average2014-2019 averageIndex-1.5-1.0-0.50.00.51.01.52.02.53.0EuroareaJPNPAKLKAEMDEbas

132、ketINDPercent48505254-5-214710Mar-24May-24Jul-24Sep-24Nov-24Jan-25Mar-25Global Sentix economic indexGlobal composite PMI(RHS)IndexIndexDevelopments in South Asia Financial conditions have tightened in South Asia,as in other parts of the world.Stock market booms in Sri Lanka and India ended and equit

133、y valuations in the rest of the region remained largely flat.As in other EMDEs,net foreign direct investment and portfolio inflows into South Asia have weakened since mid-2024.Inflows of remittances,however,have remained robust.Overall,the South Asian economy grew by 6.0 percent in 2024,0.4 percenta

134、ge points below the rate projected in the October edition of this report.Growth outcomes fell short of forecasts in most countries,particularly in Bangladesh as a result of anti-government protests and the abrupt change in government in August(figure 1.6).South Asia remained the fastest-growing EMDE

135、 region,but the gap with other EMDEs has narrowed as the regions growth has decelerated.The regions relative strength reflected above-average policy support in 2024,as macroeconomic stabilization allowed monetary policy easing(in Pakistan)and fiscal deficits widened in most countries.In most of Sout

136、h Asia,as in the median EMDE outside the region,fiscal deficits and monetary policy rates were well above pre-pandemic(201019)averages.The synchronous rise and fall of global inflation during the pandemic and the post-pandemic recovery has given way to widely divergent price dynamics,including in So

137、uth Asia.Sri Lanka has tipped into deflation while in Bangladesh inflation is persistently above target.The divergence of inflation across the region has been accentuated by idiosyncratic movements in food inflation,with food prices falling in Afghanistan,Pakistan and Sri Lanka,and rising elsewhere.

138、Meanwhile,after several years of balance-of-payments pressures,current account deficits across the region(except in Maldives)have narrowed or stabilized,reflecting robust remittance inflows,slowing import growth,and a long-awaited rebound in tourism.These developments,combined with limited exposure

139、to the U.S.economy and,in some cases,exchange rate management,have resulted in smaller movements of most South Asian currencies against the U.S.dollar than those of other EMDEs.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 7 Country developments After two years of sharp contraction,Afghanistans

140、 economy grew by 2.3 percent in FY23/24 and an estimated 2.5 percent in FY24/25.Growth was driven by agriculture,mining,construction and commerce.Modest gains in private consumption and real estate investment contributed to growth;however,rising imports widened the trade deficit,increasing external

141、vulnerabilities.The recovery in activity has been accompanied by the first signs of positive inflation after two years of falling prices.In Bangladesh,real GDP growth moderated to 4.2 percent in FY23/24 from 5.8 percent in FY22/23,primarily driven by a sharp decline in exports.Supply chain disruptio

142、ns,combined with currency depreciation and rising domestic energy prices,added to inflation pressures in 2024.Consumer price inflation peaked at 11.7 percent in July and remained elevated at 9.3 percent in February 2025.The current account balance has improved as a result of rising exports and stron

143、g remittance inflows,which have increasingly been channeled through the formal financial system as the curb market premium has narrowed.As a result of persistent inflationary pressures,Bangladeshs central bank has continued tightening monetary policy when other countries have been lowering policy ra

144、tes.Since the tightening phase began in May 2022,the policy rate has been increased by 5.25 percentage points to 10 percent.Monetary policy transmission,however,is impaired by financial system weaknesses.Non-performing loans,which are concentrated in state-owned banks,have risen significantly in rec

145、ent years,reaching 17 percent of all loans in September.The government is providing occasional liquidity support to some crisis-hit banks.Meanwhile,the transition from a managed to a fully flexible exchange rate has been delayed.In Bhutan,the economy grew by 4.9 percent in FY23/24,about the same as

146、in FY22/23.Services sector growth was broad-based,with strong rebounds in finance and tourismsupported by the reopening of borders following the COVID-19 pandemic.But agriculture yields grew modestly and hydropower exports declined because of growing domestic electricity consumption by energy-intens

147、ive cryptocurrency mining operations.Robust FIGURE 1.4 Capital flows The slowdown in capital flows to EMDEs,including to South Asia,since mid-2024 has continued.A.Net portfolio inflows into EMDEs,excluding China B.Net FDI inflows into EMDEs,excluding China C.Net FDI inflows D.Remittance inflows 0510

148、1520020406080100120140202220232024Other EMDEsSouth Asia(RHS)Billions of US$Billions of US$0.00.51.01.52.02.5OtherEMDEsLKAINDPAKBGDNPL20232024Percent of GDP051015202530NPLLKAPAKBGDOtherEMDEsIND20232024Percent of GDP-15-10-505101520252022202320242025DebtEquityBillions of US$Sources:Haver Analytics;IIF

149、 Portfolio Flow Tracker;IMF Balance of Payments and International Investment Position Statistics;World Bank.Note:BGD=Bangladesh;BTN=Bhutan;EMDEs=emerging market and developing economies;FDI=foreign direct investment;IND=India;LKA=Sri Lanka;NPL=Nepal;MDV=Maldives;PAK=Pakistan.A.Three-month rolling av

150、erage of net inflows of debt and equity into up to 23 EMDEs.Data available for 3 South Asian countries(India,Pakistan,Sri Lanka).Last available data is for March 2025.B.“Other EMDEs”includes 78 economies and excludes China .Last available data is for 2024Q3.C-D.“Other EMDEs”includes 103 economies in

151、 2023 and 72 economies in 2024.2024 data are estimated based on available quarterly data for FDI,remittances,and GDP.Xiaoou Zhu,did you change this so it is no longer a 3-quarter rolling average?It was not 3-quarterly rolling average in the first place.Sorry I didnt know why the 3-quarterly moving a

152、verage was there.growth momentum continued in the early part of FY24/25,boosted by the removal of policy measures that had previously been implemented to support the balance of payments(such as a moratorium on the import of vehicles and a ban on construction loans).Inflation fell from 5.0 percent in

153、 early 2024 to 3.1 percent in January 2025,in part due to slowing non-food inflation.The current account deficit has remained elevated,at an estimated 17.6 percent of GDP in FY24/25.Nevertheless,robust growth in remittances increased gross international reserves to the equivalent of just under 5 mon

154、ths of imports in June 2024.In India,growth slowed from 9.2 percent in FY23/24 to an estimated 6.5 percent in FY24/25the slowest pace in four years,although broadly in line with the economys long-term average.The economy was unexpectedly weak CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 8 Rese

155、rve Bank to support domestic demand by cutting its policy rate by 25 basis points in Februaryits first policy cut in almost five years.The Indian rupees value in terms of the U.S.dollar held steady between mid-2022 and end-2024,partly supported by foreign exchange market intervention by the central

156、bank.It has fallen by about 2 percent so far this year,more than the average depreciation of the currencies of EMDEs with flexible exchange rates.Indias equity markets have grown rapidly in recent years,in terms of both listings and valuations,and have attracted significant,although volatile,net inf

157、lows.In 2024,India led the world in the number of initial public offerings(IPOs)and was second only to the United States in the value of new listings.Equity derivatives markets have grown particularly quickly,prompting interventions from regulators concerned about investor protection.Since peaking l

158、ate last year,however,stock market valuations have undergone a correction.For now,this has not had broader ripple effects,but the decline in equity prices could dampen private consumption or investment over the medium term.In Maldives,tourist arrivals remained strong throughout 2024,and annual GDP g

159、rowth increased to an estimated 5.5 percent.However,despite strong tourism revenues,the estimated current account deficit remained elevated at about 20 percent of GDP in 2024,and the economy has been subjected to severe financial pressures.Rising external debt service obligations have led to a sharp

160、 decline in official reserves to critically low levels.Last October,a US$400 million currency swap agreement with the Reserve Bank of India lifted gross official reserves to US$614.6 million,equivalent to only 1.4 months of imports.Usable reserves(total reserves net of predetermined short-term drain

161、s such as debt payments)are even lower,at a precarious level.The fiscal deficit is forecast to increase further to 13 percent of GDP in 2024.Spending on subsidies remained high,which has thus far helped keep inflation low,at 1.4 percent in 2024.Several ratings agencies downgraded Maldives sovereign

162、credit rating in 2024,citing rising liquidity concerns.Although some pandemic measures,such as monetization of the government deficit,have been phased out,the around the middle of 2024 but regained its footing by the end of the year.Manufacturing growth was sluggish and public investment growth fell

163、 short of budget projections.Consumption growth accelerated thanks to robust employment growth and increasing real wages,particularly in rural areas.Declining food price inflation helped lower headline inflation to 3.6 percent in February 2025,close to the middle of the Reserve Bank of Indias 26 per

164、cent target range and substantially below the recent peak of 6.2 percent in October 2024.The current account deficit has narrowed to about 1 percent of GDP.Moderating inflation and limited external financing needs allowed the FIGURE 1.5 Inflation and monetary policy The synchronous decline in inflat

165、ion around the world has ended,and inflation expectations in some countries have increased.Central banks are generally still easing policy,but many have paused or slowed their rate cuts.Sources:Board of Governors of the Federal Reserve System;CEIC;Consensus Forecast;ECB Survey of Monetary Analysts(S

166、MA);Haver Analytics;World Bank.Note:AEs=advanced economies;BGD=Bangladesh;BTN=Bhutan;ECB=European Central Bank;EMDEs=emerging market and developing economies;IND=India;LKA=Sri Lanka;FOMC=Federal Open Market Committee;NPL=Nepal;MDV=Maldives;PAK=Pakistan;PMI=purchasing managers index;SAR=South Asia;.A

167、.Median year-on-year inflation for each aggregate.Last observation is April 15,2025.B.The chart shows three indicators of inflation expectations.These are the University of Michigans inflation expectation(“UM inflation expectation”),which is the median expected price change over the next 12 months b

168、ased on consumer surveys;the Federal Reserve Bank of St.Louiss breakeven inflation rate,which is a measure of expected inflation derived from 5-year Treasury constant maturity securities and 5-year Treasury inflation-indexed constant maturity securities;and the evolution of global Consensus Forecast

169、 consumer prices for 2025.We also show the global manufacturing new input prices Purchasing Managers Index which is a survey-based economic indicator of the manufacturing sector.Values above 50 mean improving economic conditions.C.3-month average count of monetary hikes(above X axis)and cuts(below X

170、 axis)for global 107 economies,the last available data is from March 2025.D.“SPF”is the ECBs Survey of Professional Forecasters.Last data points for ECB and Fed policy rates are from the first quarter of 2025.FOMC projections are those of the March 2025 meeting.A.Headline inflation B.Inflation indic

171、ators C.Count of global monetary policy hikes and cuts D.U.S.and Euro area monetary policy rates 525354555612345Sep-24Oct-24Nov-24Dec-24Jan-25Feb-25Apr-25UM inflation expectation5-year breakeven inflation rateGlobal inflation forecastGlobal PMI manufacturing(RHS)PercentIndex-60-40-200204060Jan-20Jul

172、-20Dec-20May-21Oct-21Mar-22Aug-22Jan-23Jun-23Nov-23Apr-24Sep-24Mar-25Policy rate hikesPolicy rate cutsCount0123456201520162017201820192020202120222023202420252026Fed funds effective rateFOMC projectionsECB policy rateSPF forecastPercent0246810Feb-20Aug-20Feb-21Aug-21Feb-22Aug-22Feb-23Aug-23Feb-24Aug

173、-24Feb-25GlobalAEsEMDEsSARPercentCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 9 exposure of the domestic financial sector to sovereign and state-owned enterprise debt continued to increase in 2024:more than one-third of bank assets are sovereign or state-owned enterprise debt.In Nepal,GDP grow

174、th accelerated to 3.9 percent in FY23/24 from 2.0 percent in FY22/23.The strengthening of growth was driven mainly by increased hydroelectric capacity and the effect of a favorable monsoon on paddy production.This was partially offset by weakening activity in construction and financial services.A sh

175、arp decline in non-food and services inflation helped lower headline inflation to about 5 percent in the second half of 2024.Meanwhile,robust remittance inflows led to a sharp turnaround in the current account balance,from a deficit of 12.5 percent of GDP in FY22/23 to a surplus of 3.9 percent of GD

176、P in FY23/24the first surplus in eight years.This helped increase official foreign reserves to the equivalent of more than 14 months of imports.The countrys IMF program is on track to be completed in 2025.In Pakistan,GDP grew by 2.5 percent in FY23/24,after a small contraction in FY22/23.Robust remi

177、ttance inflows supported private consumption,but private investment growth continued to be weak,dampened by double-digit real interest rates and political uncertainty.On favorable weather conditions,agricultural growth reached a 19-year high while industrial activity contracted and services growth r

178、emained muted.Weak growth has carried over to first half of FY24/25.Output increased by an average of 1.5 percent y-o-y in the first half of FY24/25,slower than the 2.1 percent expansion in the first half of the previous year.After last years surge,agriculture posted muted growth in the first half o

179、f FY24/25 amid drought-like conditions and pest infestations.Industrial output contracted,driven by high input costs,increased taxes,and lower government development spending,and services growth was dampened by spillovers from weak agricultural and industrial activity.The government achieved a prima

180、ry surplus in the first half of FY24/25,with fiscal consolidation efforts supported by an IMF program.The current account was in surplus at the end of 2024,helped by higher remittances,stemming from reduced FIGURE 1.6 Regional economic activity Growth in most South Asian countries has been weaker th

181、an expected.The region is still growing more rapidly than other EMDEs,but the gap has narrowed.Fiscal and current account balances improved across the region but fiscal deficits remain well above pre-pandemic averages.In most South Asian countries,inflation has fallen below the upper bounds of targe

182、t ranges.Monetary policy rates have fallen from post-pandemic highs but in several countries remain well above pre-pandemic averages.Sources:CEIC;Haver Analytics;IMF Fiscal Monitor;World Bank Macro Poverty Outlook;World Bank.Note:AFG=Afghanistan;BGD=Bangladesh;BTN=Bhutan;EMDEs=emerging market and de

183、veloping economies;IND=India;LKA=Sri Lanka;MDV=Maldives;NPL=Nepal;PAK=Pakistan.A.Revisions relative to forecasts from October 2024 South Asia Development Update.Maldives and Sri Lanka use calendar year.B.Year-on-year growth.“South Asia”consists of countries with available quarterly data:Bangladesh,I

184、ndia,and Sri Lanka.“Other EMDEs”include 61 economies.Real GDP-weighted averages(at 201019 average market exchange rates).C.2024 data are estimates from Macro Poverty Outlook.“Other EMDEs”include 132 economies.Real GDP-weighted averages(at 201019 average market exchange rates).Among South Asian count

185、ries,the data for Maldives is for the calendar year,while other countries show the fiscal year.D.The data point for 2025 refers to the monetary policy rate for each country as of April 15,2025.E.Data for Afghanistan,Sri Lanka,Bhutan and Maldives correspond to February 2025;all other countries corres

186、pond to March 2025.The EMDE median(February 2025,year-on-year)covers 92 economies.The last observation is April 15,2025.F.Figure shows the 24/25 fiscal year for all countries except Sri Lanka,which uses calendar years.A.Revisions to growth estimates for FY24/25 and CY2025 B.Output growth C.Fiscal ba

187、lances D.Monetary policy rates 0246810122023Q4 2024Q1 2024Q2 2024Q3 2024Q4Other EMDEsSouth AsiaPercent-14-12-10-8-6-4-20OtherEMDEsMDVINDPAKBGDNPLBTN2010-1920232024Percent of GDP03691215INDNPLLKABGDPAK20252010-19 averagePercent-0.9-0.6-0.30.00.30.60.91.2BGD BTNNPLINDPAKLKA MDVPercentage pointsE.Headl

188、ine CPI inflation in South Asia,latest F.Current account balances-6-303691215BGD MDV NPL BTN IND PAK AFG LKANon-food inflation contributionFood inflation contributionInflation targetEMDE medianPercent-4-20246BGDINDPAKLKANPL20242010-19 averagePercent of GDPpolitical uncertainty and exchange rate stab

189、ility,that more than offset the wider trade and primary income deficits.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 10 equivalent of 3.4 months of imports by the end of October 2024,compared with 12 weeks in the depths of the crisis in late 2022.Deflation set in from September 2024;prices dec

190、lined 4.2 percent year-on-year in February 2025 due to reductions in administered prices and a gradual appreciation of the currency.The central bank cut its policy rate again in November 2024 but has held it steady at 8 percent since then.Progress in restructuring external debt has followed the dome

191、stic debt restructuring that was completed in 2023.Formal agreements were signed in 2024 with the Export-Import Bank of China,the China Development Bank,and other official creditors.An ad hoc group of bondholders(representing about 50 percent of outstanding bonds)also agreed in September 2024 to res

192、tructure holdings of the countrys international sovereign bonds.By the end of 2024,about 98 percent of the countrys international sovereign bonds had been restructured.Bilateral debt negotiations have concluded,with only the finalization of formal agreements still pending.Outlook for South Asia Afte

193、r growing at a weaker-than-anticipated pace of 6.0 percent in 2024,growth in the region is forecast to slow to 5.8 percent in 2025(figure 1.7).The deceleration in 2025,and the 0.4 percentage point downgrade relative to the October forecast,in part reflects prospects of weakening global trade,rising

194、global inflation,and tightening global financial conditions.The region is more insulated from global trade shocks than most other EMDEs,as nearly all the regions economies are among the quarter of EMDEs least open to global trade and investment and have some of the highest tariff and non-tariff barr

195、iers to trade.With energy imports averaging about 4 percent of GDP,South Asia is also benefiting from weakening oil prices.Nonetheless,trade barriers and policy uncertainty are expected to weigh on both exports and investment across the region.After several years of large swings in growth caused by

196、the pandemic and the post-pandemic recovery,three countries in the regionBhutan,India,and Nepalare now growing at rates broadly consistent with their 201019 averages.The other The agreement reached in September 2024 on an IMF-supported policy program helped stabilize the exchange rate and reduce the

197、 risk of debt default,as reflected in ratings upgrades from several credit rating agencies and a narrowing of borrowing spreads.With depreciation pressures on the currency subsiding,a robust agricultural harvest,and administrative prices stabilizing,inflation declined steadily to 0.7 percent in Marc

198、h 2025 from its peak of nearly 40 percent in mid-2023.This allowed the central bank to lower its policy rate by 10 percentage points since June 2024 to 12 percent in January.Sri Lanka has restored macroeconomic stability following the severe economic crisis of 202223,but the recovery remains tenuous

199、.Output grew by 5.0 percent in 2024,driven by a rebound in the industrial sector and strong performance in tourism.Current account and fiscal balances improved during the year,aided by the suspension of external debt servicing,strong tourism activity,and robust remittance inflows.As the economy stab

200、ilized,usable official reserves increased to the FIGURE 1.7 Economic activity in South Asian countries In the majority of South Asian countries,growth prospects have dimmed as policy support is withdrawn and sentiment weakens.Sources:Haver Analytics;World Bank Macro Poverty Outlook.Note:AFG=Afghanis

201、tan;BGD=Bangladesh;BTN=Bhutan;EMDEs=emerging market and developing economies;IND=India;LKA=Sri Lanka;MDV=Maldives;NPL=Nepal;PAK=Pakistan;SAR=South Asia.A.Real GDP-weighted average real GDP growth rates for 8 South Asian economies and 139 other EMDEs.October 2024 forecasts exclude Afghanistan.C.For c

202、ountries that use fiscal rather than calendar years,“2025”and“2026”represent FY24/25 and FY25/26,respectively.D.Percentage points represent the difference in GDP growth compared with the initial year.A.Regional output growth B.Growth in South Asia,FY25/26 or CY2025 02468AFG PAK LKA BGD NPL MDV IND B

203、TNCurrent forecastOct 2024 forecastPercent345672024e2025f2026f2024e2025f2026f2024e2025f2026fSARSAR(excl.IND)Other EMDEsCurrent forecastOctober 2024 forecastPercentC.Output growth forecasts D.GDP growth after debt crises-15-12-9-6-3036012345YearsEMDE averagePAKLKAPercentage points012345678910AFG LKA

204、PAK BGD NPL MDV IND BTN202520262010-19 averagePercentCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 11 five countriesAfghanistan,Bangladesh,Maldives,Pakistan,and Sri Lankaare recovering from,or in the midst of,economic stress or political uncertainty.Macroeconomic stability has taken hold in Pak

205、istan and Sri Lanka,but both countries are returning to their average growth rate before their debt crises more slowly than other EMDEs affected by debt crises.Inflation is expected to remain stable and near official targets in most South Asian countries,assuming continued stability in commodity pri

206、ces and exchange rates.Risks to the inflation projections include a resumption of currency depreciations and failures to maintain exchange rate pegs.Fiscal balances remain in deficit across the region,particularly in Maldives and Pakistan.These deficits are expected to narrow over the projection per

207、iod,although at differing paces.Current account deficits have narrowed in most countries,and have almost disappeared in some cases.They are expected to remain close to historical averages in the forecast period.Inflation is expected to moderate in countries where it is currently unusually high(Bangl

208、adesh)or low(Sri Lanka)as the impact of temporary factors such as tax rate changes or currency depreciations fades.TABLE 1.1 Growth in South Asia Country fiscal year Real GDP growth at constant market prices(Percent)Revision to forecast from October 2024 (Percentage points)Calendar year basis 2023 2

209、024(e)2025(f)2026(f)2025(f)2026(f)South Asia region 7.4 6.0 5.8 6.1-0.4-0.1 Maldives 4.7 5.5 5.7 5.3 1.0 0.7 Sri Lanka -2.3 5.0 3.5 3.1 0.0 0.0 Fiscal year basis 22/23 23/24(e)24/25(f)25/26(f)24/25(f)25/26(f)Afghanistan mid-March to mid-March -6.2 2.3 2.5 2.2 N/A N/A Bangladesh July to June 5.8 4.2

210、3.3 4.9-0.7-0.6 Bhutan July to June 5.0 4.9 6.6 7.6-0.6 1.0 India April to March 7.6 9.2 6.5 6.3-0.5-0.4 Pakistan July to June -0.2 2.5 2.7 3.1-0.1-0.1 Sources:Macro Poverty Outlook(World Bank);World Bank staff calculations.Note:(e)=estimate;(f)=forecast.GDP measured in average 201019 prices and mar

211、ket exchange rates.Pakistan is reported at factor cost.To estimate forecasts for regional aggregates in the calendar year,fiscal year forecasts for Bangladesh,Bhutan,Nepal and Pakistan are converted by averaging two consecutive fiscal years,and fiscal year forecast for Afghanistan are converted by t

212、aking 25 percent and 75 percent of two consecutive fiscal years,as quarterly GDP forecasts are unavailable.Nepal mid-July to mid-July 2.0 3.9 4.5 5.2-0.6-0.3 2024(e)-0.4 0.8 0.6 23/24(e)N/A-1.0-0.4+1.0 0.0 0.0 South Asia region excluding India 2.8 3.5 3.6 4.3-0.3-0.4-0.2 Outlook for South Asian coun

213、tries For Afghanistan,economic projections have been prepared for the first time since official data publication was halted in 2021.Agriculture will remain the key growth driver,outpacing other sectors.The economy grew by an estimated 2.5 percent in 2024/25 and is forecast to remain weak in 2025/26

214、due to aid disruptions,growing 2.2 percent.With annual population growth of about 2.4 percent,this implies stagnant per capita incomes.Official development assistance has been declining in recent years but remains substantial and further reductions would weigh on growth.In Bangladesh,growth is expec

215、ted to slow from 4.2 percent in FY2023/24 to 3.3 percent in FY2024/25 before rebounding to 4.9 percent in FY2025/26.The projections have been downgraded since October for both years.This primarily reflects the disruptions arising from last summers social unrest and political tensions.It also reflect

216、s the trade disruptions,the persistence of inflation,worsening bank health,governance challenges,and general uncertainty about the countrys political future,all of which will contribute to an expected decline in investment.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 12 persistent weakness in

217、the financial system.Private sector credit has been contracting as a share of GDP,and many financial sector cooperatives have suffered losses or gone bankrupt because of nonperforming loans,particularly to the real estate sector.Nepal has also been relisted by the Financial Action Task Force,for the

218、 second time,on the grey list of countries that require greater financial monitoring due to not fully implementing money laundering and terrorist financing reforms.In Pakistan,the economy continues to recover from a combination of natural disasters,external pressures,and inflation.Inflation has slow

219、ed more quickly than expected,providing room for further monetary easing.Incoming data on economic activity have been weaker than expected,but strong imports of capital goods and high consumer confidence suggest accelerating private sector growth.Banking sector lending to the private sector has pick

220、ed up substantially as government borrowing needs have declined.Economic growth is projected to continue gradually gathering strength,rising to 2.7 percent in FY24/25 and 3.1 percent in FY25/26.In Sri Lanka,the modest growth forecast reflects the scarring effects of the crisis,structural impediments

221、 to growth,and global economic uncertainty.Progress with debt restructuring has contributed to a normalization of financial markets and will allow a resumption of large infrastructure projects funded by bilateral lenders.Overperformance of revenues relative to targets after a large increase in the v

222、alue-added tax in 2024 has improved fiscal balances,but this is being somewhat offset by significant increases in government salaries.Risks and vulnerabilities The uncertain global environment presents heightened downside risk to South Asias growth prospects.Rising tariffs,policy uncertainty,and fin

223、ancial turmoil could result in a severe global downturn.South Asia may be more insulated from global shocks than other EMDE regions because of its limited trade integration with the rest of the world,but domestic vulnerabilities could amplify any direct impacts.High government debt and Real GDP is e

224、xpected to gradually rise in the medium term,however,driven by critical reforms.In Bhutan,growth is forecast to accelerate to 6.6 percent in FY24/25 and 7.6 percent in FY25/26.The forecast upgrade in the latter year is largely due to stronger construction activity related to a large hydropower proje

225、ct for which planning was recently finalized.This is partially offset by weak growth in the agriculture sector as the transition to export-oriented agribusiness proceeds more slowly than expected.The government deficit is expanding because of higher capital expenditures,weaker-than-expected revenue

226、collection as a result of goods and services tax reform,and increasing interest payments on commercial loans.In India,growth in FY24/25 disappointed because of slower growth in private investment and public capital expenditures that did not meet government targets.In its budget for FY24/25,the gover

227、nment announced fiscal consolidation but also tax cuts to support private consumption and regulatory streamlining to spur private investment.GDP growth is expected to slow from 6.5 percent in FY24/25 to 6.3 percent as in FY25/26.The benefits to private investment from monetary easing and regulatory

228、streamlining are expected to be offset by global economic weakness and policy uncertainty.Private consumption is expected to benefit from tax cuts,and the improving implementation of public investment plans should boost government investment,but export demand will be constrained by shifts in trade p

229、olicy and slowing global growth.In Maldives,tourism accounts for about 70 percent of the economy,directly and indirectly,and strong growth of tourist arrivals is expected to continue.The completion of a new airport terminal in the second half of the year is contributing to growth accelerating to an

230、expected 5.7 percent in 2025.Activity is forecast to moderate to 5.3 percent in 2026.The countrys challenges in meeting its external debt obligations continue to pose a significant downside risk to projected growth.In Nepal,the economy is expected to grow 4.5 percent in FY24/25 and 5.2 percent in FY

231、25/26for both years,less than expected in the October edition of this report.The downgrade is due to CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 13 debt service burdens,limited international reserves in some countries,and reliance on official development assistance in others make several coun

232、tries in the region vulnerable to shifts in international financial market sentiment.Financial pressures could also arise from policy surprises abroad as well as slippages in the implementation of key domestic reforms,which could erode confidence and threaten macroeconomic stability.Severe global do

233、wnturn The two countries facing the highest new tariff barriers are the United States and China.These are the worlds two largest economies,accounting for more than 40 percent of global GDP and 20 percent of global trade.Any slowdown affecting these countries would have substantial spillovers to the

234、rest of the world.In 2023,the United States was the most important export destination for about one-fifth of countries and China was the most important destination for almost another fifth.U.S.financial markets can also transmit domestic shocks abroad through their impact on portfolio and credit flo

235、ws.China is deeply embedded in global value chains,particularly with other countries in the East Asia and Pacific region.The country is also a major importer of commodities,such that a slowdown in activity can weigh on demand and prices for metals and energy.Market participants believe the probabili

236、ty of the United States falling into recession has increased substantially.All five global recessions over the past 50 years have coincided with recessions in the United States.Only twice in this time has the United States fallen into recession without the global economy doing the same but,even in t

237、hose years,the global economy tipped into severe downturns.Consensus forecasts point to a moderate global growth slowdown,but not a severe one,let alone a global recession.But an intensification in global financial strains,a broadening of tariff increases,and persistent and rising policy uncertainty

238、 could eventually combine to tip the global economy into a severe slowdown or even recession(figure 1.8).FIGURE 1.8 Severe global downturn Tariff increases,policy uncertainty,and financial market volatility in an environment of elevated debt could result in a severe global downturn.There have been f

239、ive global recessions and three severe global downturns in the past 50 years.Monetary and fiscal policy have supported activity during past global recessions,but the inflationary effect of tariffs and sizable fiscal deficits may now limit this response.Weakening activity in the United States and Chi

240、na would have widespread spillovers,given the size of these economies.South Asia has slowed during some global recessions and emerged largely unscathed from others.The regions lack of openness limits its exposure to global shocks,but also limits opportunities to benefit from productivity-enhancing f

241、oreign technology and practices.Sources:IMF World Economic Outlook(database);Kose,Sugawara,and Terrones(2020);World Development Indicators(database);World Bank.Note:BGD=Bangladesh;BTN=Bhutan;CHN=China;EMDEs=emerging market and developing economies;IND=India;LKA=Sri Lanka;MEX=Mexico;MDV=Maldives;NPL=

242、Nepal;PAK=Pakistan;US=United States.A.B.Real GDP-weighted averages(at 2010-19 average market exchange rates and prices).Data for EMDE growth not available for 1975.C.Nominal U.S.dollar GDP-weighted averages for fiscal impulse;fiscal impulse defined as the decline in the structural fiscal balance for

243、 84 and 85 countries between 2008-10 and 2019-21.Change in U.S.federal funds rate over two year period from June 2008 and from December 2019.E.The chart shows an index equal to 100 in global recession years(shaded in gray).Average refers to the average of the last five global recessions.F.Trade is d

244、efined as the sum of goods and services exports and imports.For Maldives,2022 data are shown.“Other EMDEs”includes 72 economies,and“Small EMDEs”includes 13 economies.A.Global growth and change in global growth in global recessions B.EMDE growth and change in EMDE growth in global recession years-8-6

245、-4-20241991198220092020EMDE growthChange in EMDE growthPercent/percentage points-6-4-20219911975198220092020Global growthChange in global growthPercent/percentage pointsC.Global fiscal impulse and U.S.monetary policy rate cuts in global recessions D.United States and China as a share of global GDP a

246、nd trade 0510152025303540197319831993200320132023GDP(US)Trade(US)GDP(CHN)Trade(CHN)Percent of global-20246-202462009-102020-21Global fiscal impulse(LHS)Change in U.S.fed funds rate(RHS)Percentage points of GDPPercentage pointsE.Output in South Asia during global recessions F.Trade openness,2023 0408

247、0120160MDVBTNINDLKANPLBGDPAKEMDE interquartile rangeSmall EMDEs interquartile rangePercent of GDP80859095100105110115120125t-4t-3t-2t-1tt+1t+219751982199120092020AverageIndex,t-1=100CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 14 The damage from tariff increases also has long-term impacts.If t

248、rade tensions lead to the fragmentation of global trade into separate blocks,it would weaken an important engine of growth and technology transfer for many EMDEs.In a scenario in which global trade fragments into two blocks centered on the United States and China,the losses from trade inefficiencies

249、 and capital accumulation have been estimated to be as large as 7 percent of global GDP(IMF 2023b).Whether South Asia would suffer below-average or above-average losses in such a scenario would depend on the degree to which the region can benefit from the rerouting of trade between the worlds two la

250、rgest economies.Policy uncertainty and financial stress Some indicators point to improved macroeconomic resilience since the October 2024 edition of the South Asia Development Update.For most countries in the region,current account deficits have largely been closed,currencies that had been under pre

251、ssure have stabilized,foreign exchange reserves have been bolstered,and borrowing spreads have narrowed(figure 1.9).But these improvements are built on fragile foundations.Many countries in South Asia have only recently exited crises and needed external support to do so.The region is still the most

252、heavily indebted among EMDEs,with particularly high levels of public debt.Even after the recent improvements,foreign exchange reserves remain limited in many cases.Current financial market stability and anticipated improvements in fiscal balances are predicated upon ambitious reform programs that ma

253、y prove difficult to implement fully,especially if they trigger social unrest.Policy uncertainty in major economies could generate financial market gyrations and discourage economic activity.In times of uncertainty,firms may postpone investments and be more cautious in hiring(Bloom et al.2014;Schaal

254、 2017).Households may postpone purchases of durable goods and increase their savings.Commercial banks may increase lending rates to compensate for the risk of increased defaults(Segal,Shaliastovich,and Yaron 2015).Both global financial shocks and global uncertainty shocks can have strong and persist

255、ent contractionary The world economy has fallen into recessiondefined as a contraction in per capita GDPfive times over the past 50 years:1975,1982,1991,2009,and 2020.These episodes were characterized by highly synchronized downturns in global trade,industrial production,and capital flows,alongside

256、financial crises(Kose and Ohnsorge 2019).In global recession years,global growth slowed sharply by more than 2 percentage points,on average,and EMDE growth slowed even more,with the most severe recessions being the two most recent ones in 2009 and 2020.Global inflation and oil prices typically fell.

257、In the three global downturns over the past five decades (1998,2001,and 2012),global growth slowed by 1.4 percentage point,on average.Policy makers responded to previous downturns and recessions with significant monetary and fiscal stimulus.Governments around the world supported economic activity wi

258、th fiscal stimulus:in the last two global recessions of 2009 and 2020,global fiscal stimulus averaged 3.5 percent of GDP over a two-year period.Central banks,too,provided monetary stimulus.For example,the U.S.Federal Reserve cut policy rates by more than 1 percentage point in the last two global rec

259、essions and maintained low rates for the subsequent two years or longer.Currently,however,the scope for significant fiscal and monetary policy support is limited in many countries.Monetary policy may be constrained by the inflationary impact of tariffs,and by the fact that inflation concerns were ri

260、sing in many economies even prior to the latest tariffs.Fiscal policy provided considerable support during the pandemic and many countries still have fiscal deficits that are considerably wider than their pre-pandemic level.Further increases may be difficult to finance,particular given rising borrow

261、ing costs.Growth in South Asia slowed considerably during past global recessions,although the region only fell into outright contraction in 2020.Nearly all the regions economies are among the quarter of EMDEs least open to global trade and investment,and have some of the highest tariff and non-tarif

262、f barriers to trade.The closed nature of the regions economies limits its exposure to adverse global spillovers,such as those stemming from increasing tariffs or slowing growth in major economies,but these would still be considerable.Being less open also limits opportunities to benefit from trade or

263、 investment diversion(World Bank 2024b).CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 15 effects on output in individual countries(Cesa-Bianchi,Pesaran,and Rebucci 2020).In the past,a 1-standard-deviation increase in global economic policy uncertainty is estimated to have lowered global output

264、by more than 1 percent over two to three years(Ahir,Bloom,and Furceri 2022).South Asia has limited exposure to global trade shocks.But the regions high debt stocks,low foreign exchange reserves,and reliance on official development assistance make it vulnerable to financial shocks.An abrupt flight of

265、 capital from riskier to safer assets could have significant consequences for most countries in South Asia.Such events could be triggered by a global increase in risk aversion,policy uncertainty,or shifting trade policy.Capital flight could also result from domestic developments,such as an unexpecte

266、d increase in inflation or a failure to satisfy the conditions for IMF support of a policy program.Governments in India,Maldives,Pakistan,and Sri Lanka are already liable for above-average net interest payments relative to GDP,and will seek to finance fiscal deficits of between 7 and 17 percent of G

267、DP in 2025.In some countries,growing debt service pressures could generate cycles of rising risk premia and debt distress.Some countries in the region could experience financial pressures from policy changes in major donor countries that result in a slowdown or sudden stop in official financing.Seve

268、ral advanced economies have recently announced budget reductions for development assistance.Several countries in South Asia are highly dependent on official development assistance(figure 1.10).This is especially true for Afghanistan,which had development assistance inflows equivalent to more than on

269、e-quarter of its economy in 2022,though donors have scaled down their engagement more recently.Five of the regions eight countriesAfghanistan,Bangladesh,Bhutan,Maldives,and Nepalhave aid inflows equivalent to at least 1 percent of GDP.For all South Asian countries except India,Maldives,and Sri Lanka

270、,aid inflows are substantially larger than inflows from foreign direct investment.Currency instability has been associated with an increased probability of balance-of-payments crises FIGURE 1.9 Policy uncertainty and financial stress South Asian countries are more indebted than those in any other EM

271、DE region,on average,and need to finance sizable fiscal deficits in 2025.They also have limited foreign exchange reserves and above-median shares of foreign currency-denominated government debt.These features make the region particularly vulnerable to financial stress.A.Public and private debt,lates

272、t B.Government net interest payments,2023 C.Sovereign borrowing costs D.Foreign currency-denominated government debt,2023 010203040506070PAKBGDINDMDVNPLBTNEMDE averagePercent of revenues03691215U.S.INDEMDEsLKAPAKLatestOct 2024Percentage points0204060LKABGDPAKNPLINDPercent of GDPEMDE median0204060801

273、00120140SSAECAEAPLACMNASARPublic debtPrivate debtPercent of GDPSources:CEIC;IMF Global Debt Database;IMF Staff Country Reports 2024;IMF World Economic Outlook(database);Kose et al.(2022);Macro Poverty Outlook;Trading Economics;World Bank Macro Poverty Outlook;World Bank Debt Statistics;World Bank.No

274、te:BGD=Bangladesh;BTN=Bhutan;EAP=East Asia and Pacific;ECA=Europe and Central Asia;EMDEs=emerging market and developing economies;IND=India;LAC=Latin America and the Caribbean;LKA=Sri Lanka;MDV=Maldives;MNA=Middle East and North Africa;NPL=Nepal;PAK=Pakistan;SAR=South Asia;SSA=Sub-Saharan Africa.A.P

275、ublic debt refers to the total liabilities of the central government,while private debt includes loans and securities.Both reflect the median country level for each region in 2022,with Sri Lanka data from 2019 and Bhutan data from 2021 in the South Asia region.B.Bars show government interest spendin

276、g,derived from the difference between the overall and the primary balance.Orange line shows the GDP-weighted EMDE average.Data for Maldives is calendar year,while the rest is fiscal year.C.Figure shows the 10-year government bond yield.“EMDEs”refers to the median for 17 EMDEs.Last observation is Apr

277、il 16,2025.D.For India,proxied by nonresident-held debt.EMDEs include 39 economies.E.Public debt to public creditors includes long-term public debt to bilateral and multilateral creditors as well as IMF and SDR allocations.Public debt to private creditors is long-term.Private debt is long-term priva

278、te external debt to any creditor.Short-term debt cannot be decomposed.F.Data not published for Sri Lanka.2025 refers to calendar year for Maldives,fiscal year 2024/25 for Pakistan,Bhutan,Bangladesh and Nepal,and fiscal year 2025/26 for India.E.External debt,2023 F.Fiscal balance,2025 020406080Sri La

279、nkaPakistanBangladeshPublic debt to public creditorsShort-term debtPrivate debtPublic debt to private creditorsPercent of GDP-14-12-10-8-6-4-20MDVINDPAKBTNBGDNPLPercentCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 16 Reform slippage Many countries in South Asia have recently struggled with some

280、 combination of weak growth,high inflation,sizable current account deficits,fiscal pressures,and financial sector weakness.In 2024,these pressures caused three countries in the region to experience debt distress.To reduce their vulnerabilities and build resilience,governments have embarked on reform

281、 programs,often supported by the IMF.Half of the countries in the region are in IMF programsBangladesh,Nepal,Pakistan,and Sri Lankawhich is a higher proportion of the total in South Asia than any other EMDE region except Sub-Saharan Africa(figure 1.11).These programs come with reform commitments and

282、 conditions designed to restore or preserve macroeconomic stabilizationin particular by undertaking fiscal consolidation and increasing foreign exchange reserveswhile also enhancing social protections.Foreign exchange buffers have increased in some program countries since last year,even though they

283、remain low.All four South Asian countries with IMF programs have narrowed or closed their current account deficits,and are also expected to show greater improvements in their fiscal positions than non-program countries.The specifics of each program differ by country.In Pakistan,the government has co

284、mmitted to raising tax revenues by the equivalent of 45 percentage points of GDP,reforming the energy sector,and allowing the exchange rate to be flexible.Bangladesh entered a program to strengthen the financial sector and modernize its macroeconomic framework.Sri Lankas program aimed to restore deb

285、t sustainability,growth,and financial sector stability.Nepals program is an older vintage,as it was introduced to address the effects of the pandemic and is on track to conclude in 2025.In the medium term,estimates of the effect of IMF programs on growth vary widely.In principle,bolstering macroecon

286、omic stability should support output growth,but this may be partly offset by the negative effect on growth from the austerity measures required in the IMF program.A plurality of studies find positive effects from IMF programs,but a substantial minority find no effect or even FIGURE 1.10 Official dev

287、elopment assistance Many countries in South Asia are dependent on inflows of official development assistance.These inflows are often larger than inflows of foreign direct investment.Sources:World Development Indicators(database);World Bank.Note:AFG=Afghanistan;BGD=Bangladesh;BTN=Bhutan;EAP=East Asia

288、 and Pacific;ECA=Europe and Central Asia;EMDEs=emerging market and developing economies;FDI=foreign direct investment;IND=India;LAC=Latin America and the Caribbean;LKA=Sri Lanka;MDV=Maldives;MNA=Middle East and North Africa;NPL=Nepal;ODA=official development assistance;PAK=Pakistan;SSA=Sub-Saharan A

289、frica;SAR=South Asia.A.Regional aggregates use simple average and exclude small states.SAR includes Afghanistan,Bangladesh,India,Nepal,Pakistan,and Sri Lanka.Sample includes 17 countries in LAC,11 in EAP,10 in MNA,39 in SSA,and 17 in ECA.B.“Small EMDEs”includes 23 economies,and“EMDEs excluding small

290、 states”includes 100 economies.ODA flows to Afghanistan have declined substantially since 2022 according to estimates based on engagement with donors and UN agencies.C.Sample includes 16 economies in ECA,35 in SSA,16 in LAC,8 in SAR,10 in MNA and 10 in EAP.Regional aggregates use simple average.Econ

291、omies with missing values for any type of foreign exchange flow in 2022 are excluded.South Asia aggregation uses Sri Lankas data for 2021 to avoid the temporary disruption in inflows caused by the countrys debt default in 2022,and has no data for Afghanistans FDI in 2022.A.Net official development a

292、ssistance by region,2022 B.Net official development assistance by country,2022 C.Composition of foreign exchange inflows,2022,by region D.Composition of foreign exchange inflows,2022,by country 024681012BTNMDVAFGNPLBGDPAKINDLKASmall EMDEs,interquartile rangeEMDE interquartilerange,excludingsmall sta

293、tesPercent of GDP25.50510152025ECASSALACSARMNAEAPODA and official aidFDI inflowRemittancePercent of GDP051015202530AFG NPL MDV BTN PAK LKA BGD INDODA and official aidFDI inflowRemittancePercent of GDP01234567SSASARMNAECAEAPLACPercent of GDPin EMDEs(IMF 2023a).Currency depreciations could result from

294、 slowing inflows of capital,and would push up inflation and increase servicing costs on debt denominated in foreign currencies.In countries with pegged exchange rates,a depletion of foreign exchange reserves could culminate in an abrupt devaluation,which could have particularly severe consequences f

295、or those that have borrowed in foreign currencies on the assumption that the exchange rate would remain stable.Interest rate hikes by EMDE central banks to contain currency and capital outflows would tighten domestic borrowing conditions and slow the growth of credit and domestic demand.Higher borro

296、wing costs could prolong a decade of private investment weakness in South Asia(World Bank 2024a).CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 17 negative effects(Balima and Sokolova 2021;Bird and Rowlands 2017;Dreher 2006;ECB 2019).In the short term,however,IMF programs help protect South Asia

297、n countries from financial turmoil.South Asian countriesparticularly those in IMF programstend to have lower credit ratings than other EMDEs.Furthermore,their credit-rating assessments more often explicitly reference the IMF program.Historically,countries in South Asia have met program conditions ab

298、out as often as other EMDEs.Inability to implement program-critical reforms can delay or interrupt the flow of IMF support.This could reignite exchange rate depreciations and capital outflows,which would raise borrowing costs and add to fiscal pressures.Implementing structural reforms is not only ab

299、out avoiding a financial crisis,however.In the longer term,the successful implementation of planned reforms can help countries unlock stronger structural growth alongside macroeconomic stability.Policy challenges South Asian governments could seize the opportunity provided by the current upheaval in

300、 global trade to make their economies more attractive for trading partners interested in diverse and stable supply chains.This would require a readiness to sharply lower tariff and non-tariff trade barriers to trade as part of ongoing or new bilateral or regional trade negotiations.Given how closed

301、South Asian economies currently are,and given the regions demographic potential and growing domestic markets,opening up could generate substantial productivity and employment benefits over the medium-term.In the short term,however,it could temporarily weigh on employment and output growth if South A

302、sian product,labor,and capital markets are too rigid to allow for a quick expansion of more profitable activities and reduction in less profitable ones.The disruption could be particularly large in agriculture(Gulati et al.2025).The sector is sheltered by average tariffs of 24 percent in 2022(compar

303、ed with a global average of 15 percent)and it employs 42 percent of South Asias workforce.FIGURE 1.11 Reform slippage Half of the countries in South Asia are implementing IMF-supported policy programs.These have helped to contain currency pressures,stabilize or improve fiscal balances,and reduce inf

304、lation.Countries remain vulnerable to slippages in their policy programsnot only because slippages tend to weaken economic performance,but also because credit ratings often depend on IMF support.South Asian countries have in the past met program conditions about as often as other EMDEs.Sources:Bloom

305、berg;Oxford Economics;World Development Indicators(database);WTO Tariff Sources:Fitch Ratings;Haver Analytics;IMF Monitoring of Fund Arrangements(MONA)database;IMF Fiscal Monitor;Moodys;S&P Global;World Bank.Note:BGD=Bangladesh;EAP=East Asia and Pacific;ECA=Europe and Central Asia;EMDEs=emerging mar

306、ket and developing economies;IND=India;LAC=Latin America and the Caribbean;LKA=Sri Lanka;MNA=Middle East and North Africa;PAK=Pakistan;SSA=Sub-Saharan Africa;SAR=South Asia.A.Figure shows the average share of countries in IMF programs between 2020 and 2024,by region.B.“Other EMDEs”includes 37 countr

307、ies.Latest data are from January 2025.Comparison data is from September 2024.C.South Asian program countries are Bangladesh,Nepal,Pakistan,and Sri Lanka.Other EMDEs include 74 economies.Data from October 2024 IMF Fiscal Monitor.D.Credit ratings from S&P,Moodys,and Fitch were mapped to a unified 122

308、scale(1=lowest,22=highest),and a simple average was computed for each country.The sample includes South Asian countries(Bangladesh,India,Maldives,Pakistan,Sri Lanka),South Asian program countries(Bangladesh,Pakistan,Sri Lanka),96 non-SAR EMDEs,and 40 non-SAR program countries.Last observation is Apr

309、il 15,2025.E.Counted mentions of“IMF”in the credit assessment reports for EMDE countries and regional aggregates use simple averages;South Asian countries include Bangladesh,India,Maldives,Nepal,Pakistan and Sri Lanka;Sub-Saharan Africa region includes 28 economies,and“other EMDEs”includes 64 countr

310、ies.Last observation is April 10,2025.F.The unit of observation in the MONA dataset is the Arrangement/loan-conditionality-review round.Each arrangement/loan has several conditionalities.A conditionality is counted as a reform in all years where it is met.Figure shows the share of conditionalities m

311、et in each review round.The share ranges from 0 to 1.A.EMDEs in IMF-supported programs B.International reserves C.Fiscal balances in South Asia and other EMDEs D.EMDE credit ratings 024681012INDBGDLKAPAKSep-24LatestOther EMDEs latestOther EMDEs Sep-24Months of imports-9-8-7-6-5-4-3-2-102023 2024 202

312、5 2026 2027 2028 2029SAR program countriesOther SAR countriesOther EMDEsPercent of GDP0246810SARNon-SAREMDEsSARprogramcountriesNon-SARprogramcountriesIndex010203040506070EAPMNAECALACSARSSAPercent of countriesE.Average mentions of“IMF”in credit rating assessments F.Share of program conditions met 012

313、34Other EMDEsSARSSACount0.00.20.40.60.81.0200220042006200820102012201420162018202020222024SARNon-SAR EMDEsShare of conditionalities metCHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 18 BOX 1.1 Branching Out:The Economic Potential of South Asians Abroada Dimming growth prospects across South Asia

314、 amplify the challenge of creating jobs.Many in South Asias rapidly growing workforce are likely to continue to seek opportunities abroad.Migrants from South Asian countriesmainly to countries outside the regionaccount for about 3 percent of South Asias working-age population.About one-half of them

315、work in Gulf Cooperation Council countries,are typically low-skilled,and on short-term contracts.Another one-quarter work in advanced economies and tend to be highly skilled and longer-term migrants.While the challenges of emigration have been well documented,South Asian countries large diasporas al

316、so bring economic benefits to the home countries,both while workers are abroad and after they return homethrough remittances,improved skills,investments,and trade ties.Introduction Among emerging market and developing economy(EMDE)regions,South Asia is the second-largest source of international migr

317、ants after Europe and Central Asia.In 2020,the number of international migrants from South Asian countries to other countries,mainly outside but also within the region,was equivalent to 3 percent of South Asias working-age population.For example,the number of Nepalis living abroad was equivalent to

318、14 percent of Nepals working-age population,and the corresponding proportion for Afghanistan was 27 percent.The remittances sent by migrants are a critical source of income for households and a source of foreign exchange inflows for financial systems(World Bank 2024b).During 202023,remittance inflow

319、s from international migrants averaged 4 percent of GDP in South Asia and,in Nepal,24 percent.The largest source of remittance inflows to the region was Gulf Cooperation Council(GCC)countries(Ratha,Plaza,and Kim 2022).Globally,almost half of all migrants return home(World Bank 2023a).Both returnees

320、and those who remain abroad can benefit their home economies,in different ways.This box reviews evidence and the literature to answer the following questions:What are the characteristics of South Asias migrant population abroad?How can South Asias governments better leverage the economic potential o

321、f their large diasporas?This box reports the following findings.First,the GCC countries host one-half of South Asian migrants,while advanced economies host about one-quarter.On average,South Asian migrants in advanced economies are better educated than both the average South Asian and the average mi

322、grant from South Asian countries to other EMDEs.More than half of South Asian migrants in advanced economies have received tertiary education,compared with less than one-third of all South Asians and one-fifth of South Asian countries migrants in other EMDEs.Second,international experience suggests

323、that international migrants can benefit their origin economies both while they are abroad and after they return home.Returning migrants bring home enhanced human capital and savings,and diaspora networks foster knowledge spillovers,trade,and investment.Formal agreementssuch as those arranged by the

324、Philippines as an origin country,and by New Zealand and the Republic of Korea as host countriescan help improve predictability and working conditions.Third,South Asian governments could better harness the potential of lower-skilled,temporary migrants abroad by ensuring better working conditions and

325、formal training through bilateral agreements,facilitating remittance flows,and supporting entrepreneurship among returning migrants.To unlock greater benefits from highly skilled,long-term migrants,South Asian countries could leverage existing networks through policies that attract foreign direct in

326、vestment(FDI)or joint ventures and remove obstacles to trade between host and home countries.South Asia:Migration trends and patterns Migration trends.About 40 million people born in South Asian countries lived abroad in 2020equivalent to about 3 percent of the regions working-age population(McAulif

327、fe and Oucho 2024).Migrant populations from Afghanistan,Bhutan,Nepal,and Sri Lanka were especially large relative to their populations,a This box was prepared by Hagen Kruse and Zoe Xie.CHAPTER 1 SOUTH ASIA DEVELOPMENT UPDATE|APRIL 2025 19 and much larger than the EMDE median(figure B1.1).In contras

328、t,Maldives is a major migrant host country,with immigrants constituting one-third of the countrys working-age population(Maldives Bureau of Statistics 2024).In Nepal and Sri Lanka,the pace of net emigration during 201020 was well above the EMDE median,amid job market weakness and,in 2020,the COVID-1

329、9 pandemic,which stranded many migrants abroad(World Bank 2022).Since 2020,emigration from Bhutan,Nepal,and Sri Lanka appears to have surged further due to continued weakness in labor markets(Alaref et al.forthcoming;World Bank 2024c,2025).The number of South Asians living abroad grew by 13 percent

330、between 2020 and mid-2024.Migration destinations.The main destinations of South Asian migrants in 2020 were GCC countriesin particular,Qatar,Saudi Arabia,and the United Arab Emirates.After efforts in several GCC countries in the late 2000s to better protect immigrant workers,these countries share as

331、 a destination for South Asian nationals living abroad increased from 28 percent in 2000 to 45 percent in 2020.At least one-third of the migrant populations from Bangladesh,India,Nepal,Pakistan,and Sri Lanka lived in GCC countries,compared with less than 10 percent of migrants from other EMDEs.Meanw

332、hile,the number of intra-regional migrants declined from 37 percent of South Asian countries nationals living abroad in 2000 to 15 percent in 2020.b This decline has been attributed to the lack of job opportunities in South Asia and the acceleration in demand for low-skilled labor in the GCC countri

333、es(Ahmed and Bossavie 2022;World Bank 2024a).South Asian migrants have been hosted by a number of advanced economies,and mainly Anglophone ones.In 2020,about 20 percent of Indian migrants were in either the United States or the United Kingdom,about 20 percent of Sri Lankan migrants were in either Australia,Canada,or the United Kingdom,and about 20 percent of Pakistani migrants were in either Canad