Kathmandu, July 20

Unveiling Asian Development Outlook Supplement, the Asian Development Bank (ADB) has said economic outlook for South Asia remains robust, with growth on track to meet projections made in Asian Development Outlook (ADO) 2017 of seven per cent  for 2017 and 7.2 per cent for 2018.

Robust growth in industry and services lifted growth prospects for Nepal in fiscal 2016-17, as did accelerated earthquake reconstruction, while an improved prognosis for important tourism sector is providing a boost to Maldives, the report says. In Bangladesh and Pakistan, preliminary government growth estimates for fiscal year 2016-17 (ended June 30) beat ADO 2017 forecasts.

Agriculture growth in Bangladesh in fiscal year 2016-17 was higher than anticipated. Services growth also outperformed expectations, supported by agriculture growth and solid performances in wholesale and retail trade, real estate, hotels and restaurants, and transport.

In Pakistan, growth was similarly supported by a revival in agriculture, as well as by continued expansion in construction and steady growth in services. Strong private consumption remained the largest contributor to growth.

These improved prospects for Nepal, Bangladesh, Maldives and Pakistan are balanced by slower growth projected for Bhutan and Sri Lanka, the report says.

The construction of hydropower projects has been delayed in Bhutan, undermining economic growth there. In Sri Lanka, heavy rain caused severe floods in 15 of 25 districts and triggered landslides in some areas in May. Disrupted economic activity and damage to agriculture will slow growth in 2017, but subsequent recovery may boost GDP growth somewhat in 2018.

In India, economic growth slowed to 7.1 per cent in fiscal year 2016-17 (ended on March 31) from eight per cent in previous fiscal. “The slowdown can be partly attributed to demonetisation and replacement of high-denomination banknotes in November 2016, which affected economic activity in several cash-dependent sectors,” ADB says.

Meanwhile, developing Asia is now expected to grow by 5.9 per cent in 2017, or 0.2 percentage point higher than the rate previously envisaged. The smaller upgrade in the 2018 growth forecast — 5.7 per cent in ADO 2017 to 5.8 per cent — reflects a cautious view on the pace of the turnaround in external demand. Excluding the newly industrialised economies of Republic of Korea, Singapore, Taipei, China, and Hong Kong, China, growth projections for the region are revised up to 6.4 per cent for 2017 and to 6.3 per cent for 2018. Projections are upgraded for Central and East Asia.

The combined growth forecast for the major industrial economies — the United States, the euro area, and Japan — has been retained from ADO 2017.