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Maldives growth rate to drop to 5.2 percent in 2019: World Bank

Mariyam Malsa
14 October 2019, MVT 13:13
Maldives Monetary Authority (MMA) in the capital city of Male'. PHOTO: NISHAN ALI/ MIHAARU
Mariyam Malsa
14 October 2019, MVT 13:13

The World Bank revealed that Maldives' economic growth was expected to drop to 5.2 percent in 2019, compared to the 6.7 percent in 2018.

The most recent edition of the South Asia Economic Focus attributed the decrease to a slowdown in the construction industry following the completion of the international airport and the Sinamale' Bridge.

However, new infrastructure investments and tourism sector expansion are expected to again nudge Maldivian growth rates up to 5.5 percent in 2020 and 5.6 in 2021.

Overall, the World Bank's regional economic update predicted that South Asia's growth would slow to 5.9 percent in 2019, which reflects a global downward trend. The figure represents a 1.1 percent reduction from April 2019 estimates, casting uncertainty on a short term rebound.

The report links South Asia's slow down to the weakening of domestic demand which previously supported high growth.

In India, rates of private consumption only grew 3.1 percent in the last quarter compared to an increase of 7.3 percent in 2018. Indian manufacturing growth fell to below 1 percent in the second quarter of 2019 compared to a figure of over 10 percent recorded the previous year.

As per the report, imports also decreased considerably across South Asia, declining between 15 and 20 percent in Pakistan and Sri Lanka.

“Declining industrial production and imports, as well as tensions in the financial markets, reveal a sharp economic slowdown in South Asia”, stated World Bank Vice President for the South Asia Region, Hartwig Schafer.

“As global and domestic uncertainties cloud the region’s economic outlook, South Asian countries should pursue stimulating economic policies to boost private consumption and beef up investments”.

Despite noting that South Asia’s current economic slowdown was reminiscent of decelerating growth and trade slumps experienced in 2008 and 2012, the report maintained cautious optimism that a slight rebound in investment and private consumption could jumpstart regional growth to 6.3 percent in 2020 and 6.7 percent in 2021.

Decentralization in South Asia

In a focus section, the South Asia Economic Focus highlighted that several countries in the region had begun prioritizing decentralization as their economies become more sophisticated.

Although noting multiple South Asian initiatives to shift more political and fiscal responsibilities to local governments, aiming to improve the delivery of public services, the report warned that decentralization efforts had so far yielded mixed results.

The report asserted that central authorities should offer incentives and exercise quality control to encourage innovation and accountability at local levels for decentralization to yield results.

Additionally, the World Bank advocated for national authorities to remain proactive in empowering local governments, rather than only initiating a reshuffling of power.

“Decentralization in South Asia has yet to deliver on its promises and, if not properly managed, can degenerate into fragmentation”, said World Bank's Chief Economist for the South Asia Region, Hans Timmer.

“To make decentralization work for their citizens, we encourage South Asian central governments to allocate their resources judiciously, create incentives to help local communities compete in integrated markets, and provide equal opportunities to their people”.

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