The region as a whole is expected to grow by about 7 percent in 2010 and nearly 8 percent in 2011, says the South Asia Economic Update 2010, the World Bank's first yearly assessment of the economies of the region released in Colombo Monday.
Contrary to current beliefs, South Asia's particular strengths and forms of global integration-not the lack of it-was a key factor behind its resilience following the financial crisis of 2008, it says.
With emerging markets playing an increasing role in driving growth, integration should be a key component of a sustained and inclusive growth strategy going forward, the report says.
Noting that the drop in growth during the crisis was the smallest among all regions, the report says the region will benefit from new engines of growth and adapting to a "new normal" as emerging markets and Asia drive global growth.
Trade with East Asia and China could potentially triple to reach $450 billion per year.
"The Regional Economic Update expects growth in the region to reach close to pre-crisis peak levels and faster than its high rates of 6.5 percent annually from 2000 to 2007," said Dipak Dasgupta, lead economist and principal author of the report.
"Rising domestic confidence combined with government fiscal and monetary stimulus packages and, in some cases, external assistance is helping stimulate recovery.
"Improved optimism is helping drive the recovery in private spending in India, Bangladesh, Bhutan and Sri Lanka. India's growth is expected to rise to 9 percent in 2011, Bangladesh to 6.4 percent, Bhutan to 7 percent, and Sri Lanka to above 6 percent."
There remain some significant risks in the global environment-slowing worker remittances and exports in a still hesitant and uncertain global recovery, as recent events in Europe show, with volatile commodity prices, and continuing volatility in global capital flows, the report says.
"Over the past fifteen years the region has become much more open-and it appears that the form of openness it has chosen has provided resilience in the face of recent shocks," said Andrew Steer, World Bank Acting Chief Economist for the South Asia Region.
While high-income markets will continue to be important for South Asia, even if at a slower pace than in the past, other emerging markets and regions are also fast-growing and increasingly important partners.
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