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

MACROECONOMIC PERFORMANCE AND POLICY CHALLENGES AT THE SUBREGIONAL LEVEL CHAPTER 2
domestic production of intermediate goods and the
use of alternative energy sources. Turkey’s outward
FDI to other countries in the subregion, particularly
Bangladesh and Pakistan, is on the rise.
Future outlook and policy challenges
Despite global uncertainties and home-grown
constraints faced by most countries, the growth
outlook of the subregion is likely to improve moderately
in 2013. The region is projected to grow by 5.1%
in 2013 compared with 4.1% in 2012. The economy
of India is projected to have an improved growth
rate of 6.4% in 2013, helped by reform and policy
measures taken in 2012 to boost investment. In
Bangladesh, the Government has set an ambitious
growth target of 7.2% for 2013, which will be difficult
to attain given the critical infrastructure shortage,
global economic uncertainties and likely political
instability in an election year. It is more likely that
growth may be about 6% in line with the country’s
growth performance in recent years. In Sri Lanka,
GDP growth is expected to improve to 6.5% in
2013 due to easing of both monetary and fiscal
policies, and improved performance in all major
sectors, particularly the agricultural sector which
suffered a setback in 2012 due to adverse weather
conditions. In Pakistan, the protracted energy crisis
and weak fiscal fundamentals are the main reasons
behind slow growth. Similarly, the declining trend in
private investment expenditures is continuing. Without
stemming the free fall in investment and addressing
the challenge of chronic energy shortages, growth
cannot be improved on a sustainable basis. In
Pakistan, GDP growth is projected to be 3.5%.
In Nepal, the Government is targeting a growth rate
of 5.5% for 2013, but it is going to be difficult to
achieve. Such a rate will depend on the political
situation of the country as well performance of the
agricultural sector which accounts for one third of
GDP and employs the majority of the population.
A more realistic growth projection would be about
4%, slightly lower than that achieved in the previous
year. The economy of Bhutan will continue to
grow at robust rates in coming years due to the
expanding hydropower sector. The economy of
Afghanistan is projected to grow by 6.5% in 2013,
assuming normal weather conditions and agricultural
production. Industrial growth may be boosted by
improved electricity supplies.
In Turkey, GDP growth is projected to pick up
slightly to 3.8% in 2013, with some loosening of
monetary policy. However, a risk remains that the
global economic slowdown, especially euro zone
sovereign debt crises, could be deeper and more
prolonged than predicted. In the Islamic Republic of
Iran, severe economic sanctions along with overall
declining oil production and a cut in subsidies will
keep GDP growth very low in 2013.
In order to realize its development potential, the
subregion will have to overcome a number of
development challenges, including large concentrations
of poverty and hunger, rising inequality, poor
levels of human development, wide infrastructure
gaps, lack of a diversified base for high value added
products and exports, widespread food and energy
insecurity and high risk of disasters (SRO-SSWA,
2012). In addition, the four least developed countries
in the subregion, three of which are also landlocked,
have particular needs for international support if they
are to overcome the obstacles they face.
The subregion’s economic, social
and environmental priorities must
be balanced in favour of eradicating
extreme poverty and hunger
The subregion’s economic, social and environmental
priorities must be balanced in favour of eradicating
extreme poverty and hunger. Today, South and
South-West Asia remains home to the world’s
largest concentrations of people living in poverty and
hunger, and people without access to basic sanitation
and electricity. The subregion is also characterized
by having the world’s highest levels of child and
maternal mortality. Progress on the health, nutrition
and sanitation-related Millennium Development Goals
and related targets has been stalled because of the
large inequalities and disparities within populations
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