2016 growth outlook for South Asia

Facts about Nepal Earthquake

A strong (7.8) earthquake hit Nepal in the area near Barpak, a mountain village between capital Kathmandu and tourist town Pokhara. The earthquake was followed by many powerful aftershocks and a very powerful one (6.7) hit Nepal on Sunday April 26.

The earthquakes caused extensive damage to buildings and thousands of deaths and injuries and was even felt in Pakistan, India and Bangladesh.

Many (historic) buildings collapsed, temples have been ruined, roads destroyed. Nearly 8000 deaths in Nepal and tens of deaths in India & Tibet. The quake was followed by more than 430 aftershocks and another huge earthquake (6.8) on May 12.

The latest Global Economic Prospects 2016, the World Bank's flagship publication, has revised downward its growth forecast for India, Nepal and Pakistan and revised upward by 0.2 percentage points for Bangladesh (in fiscal year basis).

Indian economy is expected to grow by 7.8% in FY2016 (ends 31 March 2016), the highest in South Asia, followed by Bangladesh (6.7% in FY2016 that ends on June 30), Pakistan (5.5% in Fy2016 that ends on June 30), and Nepal (1.7% in FY2015 that ends on 15 July). All numbers are at market prices.

Overall, growth in India will drive the regional outlook. Investment will pick up as exports may slightly recover and remittance inflows will likely moderate as oil-rich GCC countries witness slower growth. Domestic demand will remain strong.

Higher public spending in infrastructure, the recent hike in public sector wages and pick up in exports following amendments to labors will support higher growth in Bangladesh.

The slow reconstruction work after the earthquake and the supplies disruptions will lower growth in Nepal.

Bhutan's growth will remain strong on account of progress in major hydropower projects (three are expected to come online by 2017, boosting exports to India and fiscal revenues).

Regional growth (at market prices, constant 2010 USD) is expected to be slightly better than last year: 7.3% in 2016 versus 7.0% in 2015 (calendar year basis).

UPDATE (2016-01-08): The IMF team has produced an excellent set of charts depicting fiscal, external and monetary sectors developments (especially relevant to see the developments since the earthquake and the trade disruptions along the border).