Full Report - Subregional Office for East and North-East Asia - escap

MACROECONOMIC PERFORMANCE AND POLICY CHALLENGES AT THE SUBREGIONAL LEVEL CHAPTER 2
The economy of Afghanistan has been growing at
high rates in recent years despite the continuing
adverse security situation and the challenges
associated with building political and economic
institutions. GDP growth averaged more than 10%
annually over the previous 5 years prior to 2011.
Strong investment in the construction sector, much
of which is linked to donor-led development projects,
has been providing a boost to economic growth.
Growth slowed considerably to 5.7% in fiscal year
2011 due to contraction of the agricultural sector as
a result of poor weather conditions. The economy
is estimated to have grown by 6.9% in 2012 with
improved performance of the agricultural sector. 5 The
country is known to have huge mineral deposits −
worth nearly $1 trillion according to some estimates
─ of oil, gold, iron ore, copper, lithium and other
minerals. 6 With an improved security situation,
the extraction of those minerals could provide a
big boost to the economy in the future. However,
right now heavy dependence of the economy on
external funds − aid expenditure being equivalent
to more than two thirds of GDP − is a cause for
concern. Gradual withdrawal of external funds in
the coming years could lead to a slowdown in
economic growth. To enhance economic self-reliance,
strengthening of the domestic economy through
better economic governance, improving the efficiency
of public spending, decreasing capacity constraints
and strengthening the overall business environment
should be pursued more vigorously.
The Government of India introduced
reforms to boost investment, including
allowing foreign investment in
multibrand retail, civil aviation and
broadcasting services
The economy of Bangladesh emerged largely
unscathed from the effects of the global financial
and economic crises. GDP grew by more than 6%
over the period 2009 and 2012. Growth marginally
slowed to 6.3% in 2012 from 6.7% in 2011, mainly
due to slower growth of the agricultural sector. The
industrial sector improved its growth performance as
a result of faster growth of small-scale industries
supported by the Bangladesh Bank’s inclusive finance
initiative. Growth performance of the services sector
was virtually the same over two years. All sectors
of the economy benefited from government initiatives
to overcome infrastructural bottlenecks in the power,
energy and communication sectors.
The economy of Bhutan is heavily dependent on
the production of hydroelectricity and exporting the
output to neighbouring India. Hydropower projects
have boosted the construction sector. Revival
of the tourism sector has also contributed to the
expansion of the economy, as GDP grew by 8.5%
in 2012 after expanding by 11.7% in 2011. Bhutan
is currently formulating its eleventh five year plan
for 2013-2018 to take effect in July 2013. The plan
is aimed at increasing the country’s self-reliance,
which entails a strategy that focuses on sustainable
development so that economic growth is not achieved
at the expense of environmental degradation and
“gross national happiness” is maximized. This will
be attained by concentrating on 16 different “key
result areas”, including, among others, economic
growth and food security, and on vulnerable groups.
In India, economic activity slowed considerably in
2012. While the global slowdown is having an adverse
impact on exports and consequently on economic
growth, domestic demand particularly investment
witnessed slower growth as well. Severe tightening
of monetary policy in previous years to contain
inflation and anchor inflationary expectations has
contributed greatly to this. GDP growth moderated
to 5.4% during the first half of fiscal year 2012.
In September 2012, the Government introduced
reforms to boost investment, including allowing foreign
investment in multibrand retail, civil aviation and
broadcasting services. It also partially phased out
fuel subsidies and adopted a five-year roadmap for
fiscal consolidation. Subsequently, the Government
raised the ceiling on FDI in the insurance and
pension sectors. The successful implementation of
these measures should help foster recovery later.
Growth for the year as a whole is estimated at
5% as compared with 6.2% in 2011. On the output
side, growth of the agricultural sector slowed due
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