South Asia, Sri Lanka, headed for sharper fall if policy is not tightened in time: World Bank

December 14 – (LBO) The South Asian region, including Sri Lanka, which experienced robust growth in 2006, may face a sharper and disruptive slowdown, unless fiscal and monetary policy is tightened in time, a new World Bank report has warned.

In 2006, Gross Domestic Product (GDP) in South Asia is estimated to have grown by 8.2 percent with the Maldives leading with 18 percent, India 8.7 percent, Sri Lanka 7, Bangladesh 6.7 percent and Pakistan 6.6 percent, the Bank’s newly released Global Economic Prospects for 2007, said.

Promoting private sector growth and improved macro-economic management in some countries, post disaster recovery in others have contributed to the growth while looser monetary policy has also driven growth, inflation and credit.

Stability Needed

In 2007, the bank said the region could look forward to growth of 7.5 percent (7 percent in 2008) if policy was tightened in time, despite an expected weakening of external demand from slower US growth in 2007 and tighter international monetary conditions.

“Should policy not tighten and demand continue to expand well in excess of supply, inflation outturns will be higher, current account deficits larger, and the subsequent slowdown more pronounced and