The World Bank projects Sri Lanka’s economy to grow 3.3% this year, and 2.2% next year.
"In economies that rely on external sources of growth, such as manufacturing exports (Bangladesh) and tourism (Bhutan, Maldives, Nepal, Sri Lanka), the recovery is likely to be particularly modest," the World Bank said in the latest edition of the Global Economic Prospect.
“Export growth is forecast to remain weak in Bangladesh, especially in the readymade garment sector. Demand as potential tourists remain wary of social interactions and continued restrictions on international travel."
"So far remittances have been unusually strong. Some expatriate workers say they are saving more because travel, entertainment and shopping had been curtailed in host countries due to anti-pandemic measures."
"The projected drag from remittances on the region’s economies (Bangladesh, Nepal, and Sri Lanka) is less certain given their recent strength,” the report said.
The World Bank further stated that, although financial sectors in the region have benefited from the easing of global financing conditions, additional stress on domestic banks could be triggered by the economic consequences of a sharp and sustained resurgence of infections within the region or globally.
"This could further increase corporate bankruptcies and weaken already-vulnerable balance sheets of the banking and nonbanking financial sectors in several regional economies (Bangladesh, Bhutan, India, Sri Lanka)," it said.
According to the report, the global economy is expected to expand by 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year.
The South Asia region is projected to grow by 3.3% in 2021 and 3.8% in 2022. Weak growth prospects reflect a protracted recovery in incomes and employment, especially in the services sector, limited credit provisioning constrained by financial sector vulnerabilities and muted fiscal policy support.
The forecast assumes that a vaccine will be distributed on a large scale in the region starting the second half of 2021 and that there is no widespread resurgence in infections. The report said risks to the outlook are tilted to the downside.
