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World Bank sees modest South Asia growth recovery

Struggling South Asian economies can expect better crop production to lead a modest recovery in 2002, pushing average growth to 4.9 per cent from 4.3 per cent last year, the World Bank said.

Highlighting findings in its Global Development Finance 2002 report, the World Bank said industrial sectors would benefit from higher spending by farmers reaping larger harvests.

"Agricultural output is expected to improve in the first half of 2002," it said in a statement.

"This should have a stimulating effect on the industrial sector, particularly the durable goods sector, because traditionally farmers tend to buy big ticket items during periods of good harvest and consequently increased incomes."

The World Bank said that while developing countries suffering from a global economic slowdown were likely to see a rebound this year, growth rates would remain too low for rapid poverty reduction.

It said foreign direct investment in South Asia rose 35 per cent to $4.2 billion in 2001 but the figure accounted for a low 0.5 per cent of gross domestic product.

"The relatively small FDI flows into the region reflect, in part, little progress in privatisation, glacial industrial regulations, and slow reforms in the labour market," it said.

FDI flows in the region were proportional to GDP, with 75 per cent going to India and roughly 10 per cent each to Pakistan and Bangladesh, the statement added.

The World Bank expects global economic growth to reach 1.3 per cent this year compared to 3.9 per cent growth in 2000 -- the sharpest slowdown in 30 years.

The developing world will lead the recovery, it said, with East Asia expected to expand 5.2 per cent in 2002 and 6.9 per cent in 2003.

But South Asia -- particularly Pakistan, which saw its GDP growth slow to 2.6 per cent in 2000-01 from 4.8 per cent the previous year -- was hard hit by a fallout from the September 11 attacks on the United States and the subsequent war in Afghanistan.

Trade has suffered with merchandise exports from the region slowing to 1.1 per cent growth in 2001 from 12.3 per cent in 2000, the World Bank said.

A tense stand-off between nuclear-armed rivals India and Pakistan, which have up to a million troops facing off along their border, has also increased risk in the region.

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