The report has cited political and security uncertainty as the main factors that have hindered business activities and overall domestic demand. Overall, Afghanistan and other Southern Asian countries have remained strong in the face of turbulent international markets and the region is the fastest-growing in the world. The economic growth rate of South Asia is forecasted to gradually accelerate from 7.1% in 2016 to 7.3% in 2017. “South Asia has been resilient to global turbulence due to its limited exposure to slowdowns in other major economies coupled with the tailwinds of favorable oil prices, capital flows, and remittances,” said World Bank South Asia Vicepresident. “However, fiscal and financial vulnerabilities remain and countries should strive to address them through generating revenue and creating more fiscal space.” The report’s analysis of fiscal policy across the region suggests that governments need to find a balanced path towards fiscal consolidation. “Fiscal policy has a wide range of impacts for development. The fiscal deficit affect macroeconomic stability, capital expenditures are needed for growth, and taxes and social spending matter for equity,” said World Bank South Asia Chief Economist. “With the currently low oil prices, this is also an opportune time for South Asian policy makers to introduce or expand explicit carbon taxes. This would improve environmental and fiscal sustainability at the same time.”
