Thursday 28 Mar 2024
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KUALA LUMPUR (April 18): Possible protectionism in advanced economies should not deter export-oriented growth in South Asia, a region that could even benefit from the backlash against globalisation, according to a recently released World Bank report.

The just released edition of the twice-a-year South Asia Economic Focus titled “Globalization Backlash” also confirmed that South Asia remains the fastest-growing region in the world, gradually widening its lead relative to East Asia.

The report said regional gross domestic product (GDP) growth is expected to rise from 6.7% in 2016 to 6.8% in 2017, and 7.1% in 2018.

The report asserted that global integration has been good for economic development and poverty reduction, but found that the region would be resilient to higher trade barriers in advanced economies.

“It would even stand to gain if selective protectionism resulted in trade diversion away from established suppliers.

“South Asian economies also stand to gain from the observed recovery in advanced economies, which are their largest export markets,” said the World Bank in a statement on its website April 16.

World Bank South Asia region vice president Anette Dixon said simulations on the impact of hypothetical new trade barriers showed that South Asia was not only resilient to a potential rise in protectionism but could possibly even gain from it in some circumstances.

“Advanced economies are recovering and could see faster growth that will likely increase demand for South Asian products.

“The region should seize this opportunity to diversify its exports and enhance its supply response. This could create a substantial number of jobs for new entrants to the labor force,” said Dixon.

The World Bank said that given its weight in the region, India sets the pace for South Asia as a whole.

The Bank said India’s GDP growth is expected to accelerate to 7.2% in 2018, after expanding by a slightly lower than expected 6.8% in 2016, with a temporary disruption from the withdrawal of large denomination bank notes.

The Bank said based on tangible improvements in security, Pakistan continues its upward trend and growth is expected to accelerate to over 5% this year. 

It said Nepal and Maldives are bouncing back from economic shocks, adding that Bangladesh industrial production reached a record-high recently and growth remains strong.

The World Bank said analysis of different hypothetical trade scenarios finds that South Asia stands to benefit from the stall of large regional trade agreements such as the Trans-Pacific Partnership (TPP).

“It would also gain in the hypothetical scenario of greater protectionism against major exporting countries such as China and Mexico.

“The research finds that South Asian growth is highly responsive to higher growth in advanced economies, which could offset potential losses from changes in trade policy,” it said.

Meanwhile, World Bank South Asia region chief economist Martin Rama said that to make the most of this export opportunity, countries in the region should continue to focus on polices that promote economic growth.

“A survey of South Asian experts conducted for this report reveals a strong consensus on the need to promote human capital accumulation, investments in infrastructure, and a more business-friendly environment,” said Rama.

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