The Asian Development Bank, in its latest Asian Development Outlook (ADO) update yesterday, forecasted Sri Lanka’s economic growth to contract by 5.5%, the third worst performance within South Asia.
The latest outlook by the Asian Development Bank (ADB) however rates an improved performance as the June ADO update forecasted the Lankan economy to contract by 6.1%. The outlook for 2021 remains unchanged with a 4.1% growth forecast for Sri Lanka.
Tourism-dependent Maldives’ economy is estimated to contract by as much as 20.5% and India is to contract by 9%.
ADB’s outlook estimates the Pakistan economy to contract by only 0.4% and Afghanistan by 5%.
However, ADO forecasts the Bangladesh economy to grow by 5.2% in 2020 and that of Bhutan by 2.4% and Nepal by 2.4%. The ADO update said South Asia would see economic woes deepening as COVID-19 spreads. It said the sub-region was now expected to shrink by a steep 6.8% in 2020 and rebound by 7.1% in 2021.
India began its fiscal year with April-June quarterly GDP contracting by a record 23.9% as a pandemic lockdown clobbered consumer and business spending.
“Maldives and Sri Lanka, heavily dependent on tourism, will be among the hardest hit. Output in Maldives is expected to shrink by a fifth in 2020, the sharpest GDP forecast revision in the sub region, then grow by 10.5% in 2021,” the ADO Update said.
Growth expectations for Afghanistan have also worsened, with output forecast to decline by 5.0% this year. Output will inch up by 1.5% next year as the country continues to grapple with political and security instability.
Bangladesh, Bhutan, and Nepal managed to grow in their recently-completed fiscal years because COVID-19 affected only their tail-end. They are set to continue expanding in the current fiscal year, though only minimally for Bhutan and Nepal.
Inflationary pressures have begun to intensify in South Asia, especially in India, as supply chain disruption has pushed up food prices.
The 2020 inflation forecast for the sub-region is thus adjusted upward, with prices now expected to rise by 5.2%. The sub-regional inflation forecast for 2021 has been revised up marginally to 4.5%.