According to the report, South Asia’s economic outlook remains robust, with regional GDP anticipated to grow by 5.7% in 2025, compared to 5.9% in 2024, supported by strong performance in India and recovery in Bhutan, Nepal, Pakistan, and Sri Lanka. Risks to the economic outlook are tilted to the downside due to a deceleration in external demand, ongoing debt challenges, and social unrest in parts of South Asia.
The report highlights hurdles for developing nations in mobilizing financing to invest in critical infrastructure, technology, and human capital, and in moving up manufacturing and services value chains. It adds that the benefits of the green transition and technological advancements are projected to remain disproportionately concentrated in developed economies.
High borrowing costs and debt sustainability challenges are likely to persist, increasing the vulnerability of developing economies facing high risks of debt distress.
Economic growth in the least developed countries (LDCs) is projected to rise to 4.6% in 2025, up from the 4.1% growth estimated for 2024, but still well below the 7% Sustainable Development Goals (SDG) target.
While the international tourism recovery is expected to lend some support to LDC growth, conflicts and geopolitical tensions, particularly in Africa, may deter the investment needed for stronger economic expansion.
Additionally, rising external public debt leaves many LDCs at significant risk of debt distress. While the inflation rate for developed economies is expected to decline from 4.8% in 2023 to 2.6% in 2024 and 2.2% in 2025, the rate for developing economies is projected to decrease more gradually, from 7% in 2023 to 6% in 2024 and 5.1% in 2025.
The double-digit inflation rates recorded for several developing countries in 2024 are likely to extend into 2025.
ALSO READ: Ministry of Commerce and Industry revises trade data following reconciliation
First Published: Jan 10, 2025 12:09 AM IST
