South Asian economies still facing risks: World Bank

World Bank has revealed that state reserves in Maldives and Pakistan to have dwindled to critical levels, and that South Asian economies are still facing risks.

This year’s first edition of the twice-yearly “South Asia Economic Focus” report published by the World Bank warned that even though South Asia is regaining its economic momentum, the recovery in the world’s region with the largest number of poor people could falter in the absence of a stronger investment climate.

It states that the combined growth of Afghanistan, Bangladesh, Bhutan, India,Maldives, Nepal, Pakistan, and Sri Lanka was just 4.7% in 2012, although a pick-up to 5.5% can be expected in 2013 with on-going efforts to regain fiscal space and boost private investment. Given the uncertain global environment, the report stressed that it will be important to strengthen the investment climate.

The World Bank’s twice-yearly look at South Asia’s economic prospects stated that the region is now more vulnerable due to widened current account balances, slowed direct investment, and a persistently high inflation that has limited the abilities of the central banks to use monetary policy to counter any economic downturn.

Rising imports have also caused the countries in South Asia to be more vulnerable to increases in commodity prices, World Bank states.

The report continued to warn that while the Maldives and Pakistan, have seen their reserves dwindle to critical levels, the fiscal deficits of India, Sri Lanka and Bhutan remain high.

Recent statistics from the Maldives central bank, the Maldives Monetary Authority (MMA) have shown that Maldives had a reserve of MVR 4.9 billion by the end 2012, which has increased to MVR 5.6 billion by the end of February 2013.