2014年-世界发展银行全球_South_Asia_Economic_Focus_Spring_2014___Time_to_Refocus_74页_6mb

South Asia Economic Focus Summary - Spring 2014

Core Content

This report provides an overview of the economic developments and outlook for South Asia in Spring 2014, highlighting the shift from external to domestic risks and the varying performance of individual countries.

Main Points

• Economic Recovery in Advanced Economies: Advanced economies such as the US, Japan, and the Eurozone showed signs of slow but sustained recovery. The US Federal Reserve reduced quantitative easing, which had implications for South Asian economies.

• South Asia's Economic Performance:

  • The region experienced a strong cyclical rebound in 2013Q3 but growth has since slowed.
  • Regional real GDP growth in 2013 was 4.8%, lower than East Asia and Pacific (7.2%) but higher than other developing regions.
  • Output growth remains sluggish, with India being the main growth engine, although its momentum slowed in Q4 2013.

• External Vulnerabilities:

  • India: Managed to reduce its current account deficit (CAD) significantly, from 4.9% of GDP in 2013Q2 to 0.9% in 2013Q4. Capital inflows rebounded in 2013H2 and proved resilient in early 2014.
  • Pakistan: Maintained a small CAD and had solid remittance inflows. However, it faced challenges with capital and financial account balances.
  • Bangladesh: Remained below its potential, with modest FDI inflows and a declining trade deficit.
  • Nepal: Experienced a current account surplus due to high remittances, though export growth was limited.
  • Sri Lanka: Reduced its CAD to around 4% of GDP in 2013 and saw a rise in international reserves.
  • Bhutan and Maldives: Both had large CADs, though Bhutan's was more stable due to hydropower exports, while Maldives faced significant external vulnerabilities.

• Capital Flows:

  • Capital inflows into South Asia regained momentum in early 2014, showing resilience compared to May 2013.
  • India's capital inflows were primarily driven by Non-Resident Indian (NRI) deposits, which increased by over 700% year-on-year.
  • Portfolio flows were volatile, but India managed to attract them again after a period of outflows.

• Exchange Rates:

  • India's real effective exchange rate (REER) depreciated during 2013, improving competitiveness and boosting export growth.
  • The depreciation was mainly due to the reversal of capital flows and the strengthening of the Indian economy.
  • Pakistan's exchange rate stabilized, and its reserves improved, though still below the regional average.

• Industrial Production:

  • Industrial production across South Asia was weak and volatile, with the exception of Pakistan.
  • India's industrial growth was modest, with some sectors showing signs of recovery.
  • Bangladesh and Nepal experienced slower growth due to political instability and supply-side constraints.

• Fiscal and Monetary Policies:

  • Fiscal deficits and sovereign debt remain a concern for many South Asian countries.
  • Monetary policy in the region has been broadly tightened, with the exception of Sri Lanka, which maintained an accommodative stance to support growth.
  • Tight monetary policy has helped build confidence among international investors.

• Inflation Trends:

  • Inflation remains high in South Asia, but there are signs of it losing momentum.
  • Food prices continue to be the main driver of CPI inflation.
  • Favorable weather conditions and India's support price mechanism contributed to a reduction in food price inflation.

• Key Risks and Vulnerabilities:

  • The main risks are gradually shifting from external to domestic factors.
  • Domestic vulnerabilities include political instability, fiscal stress, and financial sector risks.
  • These risks are discussed in detail in the Focus section of the report.

Focus: From External to Domestic Risk

• Tapering Talk Surprise: The report discusses the impact of US tapering on South Asian economies, particularly India.
• India's Public Banks and Private Debt: India's public banks and private corporate debt are highlighted as areas of risk.
• Pakistan's Private Banks and Public Debt: Pakistan's financial sector and public debt are under scrutiny.
• Nepal's Banks and Liquidity: Nepal's banking sector and liquidity issues are noted as key challenges.

Country Briefs

• Afghanistan: Experienced a strong rebound in GDP growth, driven by agricultural output and remittances. However, security concerns and elections in 2014 pose risks.
• Bangladesh: Growth slowed due to political instability and supply-side constraints. Remittances and exports helped offset some of the challenges.
• Bhutan: Benefited from favorable monsoon rains and increased hydropower generation, leading to a boost in export revenues.
• India: The main economic engine of the region, with strong service sector growth and improving competitiveness.
• Maldives: Continued to experience slow growth, mainly due to tourism and its spillover effects.
• Nepal: Maintained a current account surplus, but growth remained low.
• Pakistan: Faced challenges in capital and financial account balances, though reserves improved.
• Sri Lanka: Showed a strong rebound in growth, with increasing remittances and tourism earnings.

Key Figures

• Figure 1: Real GDP growth in advanced economies shows a sustained but slow recovery.
• Figure 2: South Asia experienced a strong cyclical rebound in 2013Q3.
• Figure 3: Capital flows to South Asia increased slightly in February 2014.
• Figure 4: India's nominal exchange rate proved highly resilient in early 2014.
• Figure 5: Current account balances are slowly shrinking, except for Bhutan and Maldives.
• Figure 6: Capital flows to South Asia are more robust, but their composition has changed.
• Figure 7: India's current account deficit was mainly financed through increased NRI deposits.
• Figure 8: India's real effective exchange rate depreciated during 2013.
• Figure 9: Export growth increased significantly in 2013, indicating a competitiveness dividend.
• Figure 10: Foreign exchange reserves are broadly solidifying, except for Pakistan and Maldives.
• Figure 11: Industrial production growth remains weak and volatile across South Asian economies.
• Figure 12: Real GDP growth in South Asia paints a mixed picture.
• Figure 13: India's real GDP growth bounced back in 2013Q3 but lost momentum in Q4.
• Figure 14: India's Purchasing Managers' Index (PMI) suggests better times ahead.
• Figure 15: Policy rates reflect a tightening of monetary policy, with the exception of Sri Lanka.

Conclusion

The report emphasizes the transition from external to domestic risks in South Asia, with a focus on India's economic resilience and the challenges faced by other countries. It also highlights the importance of fiscal and monetary policies in managing these risks and the need for continued efforts to improve domestic stability and growth.