The New Nation - Internet Edition

Staff Reporter

Bangladesh, Bhutan and India are recovering quickly from the global economic crisis, said World Bank economist Eliana Cardoso.

In an article titled 'South Asia Rebounds' she said Pakistan, Nepal, Sri Lanka and Afghanistan face a more difficult situation because of bitter conflicts. Sri Lanka and Nepal have come out of civil wars, which weakened their macroeconomic management, but the end of conflict carries the prospect of a peace dividend.

In contrast, Afghanistan has seen sharply ratcheting conflict and an earlier drought. Both create poor prospects for growth. Pakistan is the most difficult setting, where the conflict has sharply aggravated its already precarious fiscal and balance of payments situation.

The region as a whole now faces at least two big challenges-food price inflation and fiscal imbalances.

"Food price inflation is a major problem. The upsurge in global commodity prices preceding the global financial crisis had a strong negative impact in South Asia."

"While global prices have since declined sharply and disinflation was evident in the rest of the world, consumer prices have been under pressure in South Asia."

"In part, this reflects the lagged effects of higher food prices from global markets last year, and in part, the recent severe drought in India, which is forcing its imports higher and cutting back its exports. But consumer prices have been falling recently in other South Asian countries, such as Bangladesh and Sri Lanka."

"The global financial crisis took South Asia's growth down by about 3 per cent points (from 8.6 per cent in 2007 to 5.6 per cent in 2009). This was the smallest growth decline among all regions of the world and the prospective recovery is already underway. The World Bank expects GDP growth to recover to nearly 7 per cent per annum on average in 2010-2011.”