Growth in South Asia this year is forecast to be at 7 per cent slightly, up from the 6.9 per cent recorded for 2003, the Asia Development Bank said on Wednesday.
 
In its annual report, the ADB said the forecast assumes that breakthrough talks between India and Pakistan that began last year continue and that there is no deterioration in the security situation in Afghanistan, Nepal and Sri Lanka.

India's gross domestic product growth for this year is forecast at a buoyant 7.4 per cent and at 7.6 per cent in 2005.

"Despite this remarkable overall performance and the fact that India is becoming one of the fastest growing economies in the world, it appears that it will not quite achieve the 8 per cent target the government has set for rapid poverty reduction," the ADB said.

Pakistan's outlook is also for stronger growth of 5.5 per cent this year and 5.8 per cent in 2005.

"Solid improvement in the macro-economic fundamentals and structural reforms that are boosting investment activity, such as the modernisation of the textile industry, underpin this outlook," the ADB said.

The Bangladeshi economy has been strengthened by the policies adopted in completing its first-year of the Poverty Reduction and Growth Facility programme with the International Monetary Fund.

"Deepening of reform efforts that would foster greater investment and the availability of additional concessional aid has improved the outlook for growth which is projected to increase to 5.7 per cent this year and 6 per cent in 2005," the report said.

The ADB noted that the outlook for the garment and textile industry and employment generally in the post-Multi-fibre agreement environment is "worrisome". Bangladesh is a major textiles producer.
 
The ADB said economic prospects in Afghanistan are promising and annual growth of 15 per cent in the medium term is feasible although this will require the "commitment of the international community to meet the country's investment and security needs."

Sri Lanka's growth is projected to be at 5 per cent this year and 5.5 per cent in 2005 but much will depend on the economic policies of the new government and the future of the peace talks with Tamil rebels.

Nepal's growth is forecast to be at 4 per cent this year and 5 per cent next year but much will depend on the security situation in the country, the ADB said.

In Bhutan strong growth is projected at 7 per cent this year and 8 per cent next year.

"A major hydropower project to be commissioned in September 2005 will provide a large step-up in export and budget revenues," the report said.

AFP