Washington, South Asia is poised to maintain its status as the fastest-growing region in the world, with an expected growth rate of 6.0% in 2024, largely propelled by significant growth in India and recoveries in Pakistan and Sri Lanka. However, the World Bank warns that despite this strong growth, the region faces persistent structural challenges that could undermine its sustainability and hinder job creation and climate resilience.
According to The World Bank, “Jobs for Resilience,” the region’s growth is expected to slightly increase to 6.1% in 2025, maintaining its global lead. Yet, the report emphasizes that this positive outlook masks underlying vulnerabilities. Many South Asian countries are experiencing growth rates still below pre-pandemic levels, heavily reliant on public spending, while private investment has seen a marked slowdown. Moreover, the region is struggling to generate sufficient employment to match the pace of its growing working-age population.
Martin Raiser, World Bank Vice President for South Asia, highlighted the dual threats of fragile fiscal positions and escalating climate shocks looming over the region. He advocated for policies aimed at enhancing private investment and strengthening employment growth to bolster economic resilience.
The report sheds light on South Asia’s employment trends, noting a worrying discrepancy between the growth of the working-age population and employment rates. Despite an increase in employment growth, it falls short of the burgeoning working-age population growth, leading to a declining share of the employed working-age population since 2000. The employment ratio in South Asia stands at 59%, lower than the 70% average in other emerging markets and developing economies. Notably, South Asia has witnessed a decrease in the share of working-age men employed over the past two decades and has the lowest employment ratio for working-age women.
World Bank Chief Economist for South Asia, Franziska Ohnsorge, pointed out the missed opportunity in capitalizing on the demographic dividend, suggesting that aligning the region’s employment share with that of other emerging markets could significantly boost its output by 16%.
The report identifies non-agricultural sectors as the primary areas of weak employment trends, attributing this to challenging institutional and economic conditions that hinder firm and business growth. It recommends several policies to stimulate firm growth and employment, including increasing trade openness, improving access to finance, enhancing the business climate, removing financial sector restrictions, and promoting education and gender equality in economic activities.
Country-specific outlooks provided by the report include a projected growth of 5.7% for Bangladesh and Bhutan in FY24/25, a robust 7.5% for India in FY23/24 before moderating to 6.6%, and a recovery in Pakistan and Sri Lanka with expected growth rates of 2.3% and 2.5%, respectively, in the coming years.
The World Bank’s update serves as a comprehensive analysis of South Asia’s economic prospects, underscoring the imperative for structural reforms to sustain long-term growth and mitigate climate risks.