Global Financial Crisis: Effect on South Asia

October 21, 2008 - Over the last 10 years, South Asia witnessed a rapid and robust growth of more than six percent per annum, which enabled millions of people to escape poverty. In 2006, the region recorded a growth rate of nine percent – the highest in the last 25 years.However, in the last five years, price increases of global commodities, especially those of oil, metal, and food, took a toll on South Asia. Budget deficits widened and trade balances worsened. With this, the growth softened and inflation reached double digits. Before the region could recover from the adverse impact of high commodity prices, the global financial crisis has come knocking. The cascading effects of these crises will present daunting policy challenges to South Asia.The adverse impact has the potential to reverse elements of the impressive development gains that South Asia has achieved over the past decade and impede its progress towards achieving the Millennium Development Goals (MDGs).“The slowdown in the global economy will adversely impact South Asian exports and thus foreign earnings,” said Sadiq Ahmed, World Bank Acting Chief Economist for the South Asia region. “Coupled with lower foreign capital flows and domestic investment, this will significantly reduce growth for South Asia.” (Download Analysis - pdf)

Read analysis about the global financial crisis and its impact on South Asia