June 05, 2017 (LBO) – Sri Lanka’s growth is forecast to accelerate to a 4.7 percent rate in 2017 and 5 percent in 2018, a new World Bank report says.
According to the World Bank’s June 2017 Global Economic Prospects growth will happen as international financial institution programs support economic reforms and boost private sector competitiveness.
Growth in the South Asia region is forecast to advance to a 6.8 percent pace in 2017 and accelerate to 7.1 percent in 2018, reflecting a solid expansion of domestic demand and exports.
The report says excluding India, regional growth is anticipated to hold steady at 5.7 percent this year, rising to 5.8 percent in the next, with growth accelerating in Bhutan, Pakistan, and Sri Lanka, but easing in Bangladesh and Nepal.
India is expected to accelerate to 7.2 percent in fiscal 2017 (April 1, 2017 – March 31, 2018) and 7.5 percent in the following fiscal year. Domestic demand is expected to remain strong, supported by policy reforms.
Pakistan is expected to pick up to a 5.2 percent rate in fiscal 2017 (July 1, 2016 – June 30, 2017) and to 5.5 percent in the next fiscal year, reflecting an upturn in private investment, increased energy supply, and improved security.
The report forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies.
Growth in advanced economies is expected to accelerate to 1.9 percent in 2017, which will also benefit the trading partners of these countries.
Global financing conditions remain favorable and commodity prices have stabilized. Against this improving international backdrop, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016.
Growth among the world’s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for growth in other emerging and developing economies and globally.
Nevertheless, substantial risks cloud the outlook, the report said.
“New trade restrictions could derail the welcome rebound in global trade. Persistent policy uncertainty could dampen confidence and investment.”
“Amid exceptionally low financial market volatility, a sudden market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence.”
Over the longer term, persistently weak productivity and investment growth could erode long-term growth prospects in emerging market and developing economies that are key to poverty reduction, it added.
The report highlights concern about mounting debt and deficits among emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions might be damaging.
At the end of 2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by more than 5 percentage points of GDP in one-third of these countries.
The report can be downloaded here