April 17, 2018

South Asia is again the fastest growing region in the world, albeit not by a wide margin. The rebound was led by India, whose growth rate picked up in the second half of 2017 after five consecutive quarters of deceleration. Inflation has increased in South Asia, in line with more vibrant economic activity and higher oil prices, but it is aligned with other regions. Besides, the inflation rates of most countries in the region remain near or below inflation targets. Despite an acceleration of economic growth in destination markets, export performance remains disappointing throughout the region, while imports are growing rapidly. The trade deficits of the three biggest countries in South Asia have widened. While remittances are recovering, current account deficits have continued to widen, but among larger countries the deficits are mostly within safe boundaries. The Indian and especially the Pakistani rupee depreciated recently, which may support an improved external balance. As usual, fiscal deficits in South Asia remain large by international standards, and government debt is high in many countries in the region.