(CPV) - Despite some moderation in growth, the economies of South and South-West Asia were able to maintain strong growth momentum in 2011. The subregion as a whole achieved GDP growth of 6.7 percent in 2011 as compared to 7.6 percent in the previous year.
The economy of Afghanistan has been experiencing high growth rates in recent years despite security concerns. After growing 8.4 percent in 2010, GDP expanded 5.7 percent in 2011. Adverse weather conditions led to a contraction of the agricultural sector, which slowed overall growth of the economy in 2011.
However, strong investment in the construction sector, much of which was linked to donor-led development projects, provided a boost to economic growth. The economy’s heavy dependence on external funds, with aid expenditure being equivalent to more than two-thirds of GDP, is a cause of concern.
The withdrawal of external funds in the coming years could trigger a rapid slowdown in economic growth. Therefore, strengthening the domestic economy through enhanced economic governance, improving the efficiency of public spending, decreasing capacity constraints and strengthening the overall business environment should be pursued move vigorously.
The economy of Bangladesh has grown steadily over the past five years, averaging 6.2 percent per annum, despite the adverse effects stemming from the global financial and economic crisis and some major natural disasters.
GDP grew 6.7 percent in 2011 compared to 6.1 percent in the previous year. The agricultural sector expanded at a slightly slower pace in 2011 but continued to perform well while a much improved performance of the industrial sector was helped by strong export growth and a significant rise in investment in productivity enhancing capital goods and industrial inputs.
Growth in the services sector also improved slightly. All of the sectors of the economy benefited from government initiatives to overcome infrastructure bottlenecks in the power, energy and communication sectors.
The economy of Bhutan is heavily dependent on the generation of hydroelectricity and its exports to neighbouring India. After growing 11.8 percent in 2010, GDP expanded 5.4 percent in 2011, aided by hydropower projects, which boosted the construction sector, and the revival of the tourism sector.
A new economic development strategy, finalized in March 2010, aims to diversify the economic, promote regional development, generate employment opportunities, promote exports and entrepreneurship and enhance economic self-reliance.
The focus of the strategy is on sustainable development so that economic growth is not achieved at the expense of environmental degradation and ultimately “gross national happiness” is maximized.
Despite moderation in economic activity, the economy of India maintained strong growth momentum in 2011 in which GDP grew by 6.9 percent as compared to 8.4 percent in 2010.
To contain inflationary pressure on private consumption growth, which contributed to the deceleration in growth in the short-term. While the global slowdown may have dampened export growth, high inflation and interest rates exerted downward pressure on private consumption growth, which is the main driver of overall economic expansion, accounting for nearly 60 percent of nominal GDP.
Investment growth also slowed significantly. This may have an adverse implication for growth next year. On the output side, the slowdown in growth was mainly due to lower industrial growth, at 3.9 percent, in 2011 as compared to 7.2 percent in the previous year.
Slower growth of the agriculture sector, at 2.5 percent, in 2011 should be seen in the context of a high base when the sector grew by 7 percent in the previous year.
The services sector was clearly the main driver of growth as it expanded by 9.4 percent, more or less the same level in 2010. Being a net exporter of oil, the Islamic Republic of Iran has been benefiting from high oil prices.
GDP growth improved to 4 percent in 2011 from 3.2 percent in the previous year. The better performance of the agriculture sector also supported the higher growth in 2011.
The hydrocarbon industry, however, continues to suffer from a lack of foreign investment, which is adversely affecting prospects for a sustainable increase in the output of oil and gas over the long term.
The Fifth Five Year Development Plan (2010/2011 – 2015/2016) of the country aims for further diversification of the economy and a substantial reduction in the government’s dependence on oil and gas revenues, an enhanced role of the private sector, the elimination of subsidies, rapid employment generation and more equal distribution of income.
The economy in Maldives is heavily dependent on tourism and fisheries sectors. After contracting 4.7 percent in 2009 due to the global economic crisis, the economy staged a strong recovery, at 5.7 percent by 2010 and 7.5 percent in 2011. The revival of the tourism sector and consequent boost to the construction sector supported the strong growth.
Low growth in Nepal in recent years has largely been due to political instability, frequent strikes in the country, persistent labour problems and severe electricity shortages.
GDP growth slowed to 3.5 percent in 2011 compared to 4 percent in 2010. The country’s agriculture performance improved due to favorable weather conditions, but its industrial and services sectors recorded lower growth rates.
GDP growth in Pakistan slowed considerably to 2.4 percent in 2011 from 3.8 percent in 2010, mainly due to prevailing security concerns, the exogenous shock from elevated oil prices and unprecedented floods in a large part of the country.
Severe shortages of electricity and natural gas in the country have also hampered economic growth. The industrial sector witnessed a minor contraction in 2011 after growing more than 8 percent in 2010. This was due to supply side constraints, mainly energy slightly due to the post-flood recovery in wheat, sugar cane and minor crops. However, major crops, particularly rice and cotton, suffered huge losses due to floods. Growth of the service sector improved, partly on the back of a hike in the salaries of government employees and the expansion of social services in the wake of the flooding, which helped prevent the overall growth of the economy from falling further.
On the demand side, both savings and investment as a ratio to GDP fell in 2011. The investment ratio stood at 13.4 percent, the lowest level since 1974.
The economic of Sri Lanka continued to grow at a high rate. It expanded 8.3 percent in 2011 as compared to 8 percent in 2010. High growth momentum was supported by an improved macroeconomic environment, increased capacity utilization, expansion of economic activity in the northern and eastern provinces and enhanced external demand.
Growth in 2011 was broad-based with positive contribution provided from all the major sectors of the economy. The agriculture sector expanded despite heavy floods in the early part of the year.
The industrial sector grew rapidly, particularly due to an increase in manufacturing output as a result of higher demand from both domestic and international markets and expansion in the construction industries.
The expansion in the services sector largely reflected improved performance in trade, tourism and transport activities and financial services.
On the demand side, private consumption growth, fuelled by rising incomes and overseas workers’ remittances, contributed to the economic expansion. At the same time, gross investment increased from 27.6 percent of GDP in 2010 to 29.9 percent of GDP in 2011.
The economy of Turkey, which is comparative more open than other economies in the subregion due to its strong trading links with the European Union countries, contracted sharply in 2009 due to the global economic crisis.
However, a sound macroeconomic policy and reforms implemented in the previous years helped to limit financial system stress by keeping the balance sheets of banks and households strong, which successfully contained interest and exchange rate volatility.
The implementation of a flexible policy response in terms of relaxation of fiscal, monetary and financial policies also contributed to the strong economic recovery. After growing at 9 percent in 2010, GDP expanded by 8.5 percent in 2011, driven by strong private investment and consumption.
Domestic demand increased at a rapid rate, financed by loan growth made feasible by historical low interest rates.
However, even though the Turkish economy remains relatively more robust, it is not immune to stress in the national financial markets due to its high current account deficit, which has made the country dependent on external financing and thus exposed to fluctuations in global liquidity cycles./.