Box 1.4. Voices from South Asia

coPIng wItH sHocks: mIgRAtIon And tHe RoAd to ResIlIence

Box 1.4. Voices from South Asia

As in the last seven editions of this report, we conducted an opinion survey among experts and researchers in the South Asian academic, policymaking and consultancy communities. This time, as countries are confronted with multiple headwinds and policymakers face policy dilemmas and trade-offs, the survey focused on the experts’ views on the macroeconomic policy trade-offs and alternatives. We also surveyed views on migration issues.19

Experts’ opinions suggest a continued economic recovery, albeit a less promising prospect. Eighteen percent of the experts see the level of economic activity already at or above the pre-COVID level, a strong improvement from 13 percent in the spring, and 8 percent in fall 2021 (Figure 1.22). However, only 47 percent of experts expect an increase in real GDP growth within the next six months, which reflects the experts’ belief of heightened risks to recovery. Among potential risks to economic recovery, high inflation is perceived as the biggest threat in the short run by 37 percent of respondents (Figure 1.23). The second biggest risk comes from financial sector stress, as 17 percent of the experts rank it as the top risk. A few respondents (13 percent) noted widening current account deficits and sluggish consumption and/or investment as risks to the recovery, followed by increasing budget deficits. By contrast, the risk of another wave of the pandemic has largely subsided according to respondents, a marked decline compared to the Fall 2021 and Spring 2022 surveys.

To curb inflation, experts are moderately supportive of monetary tightening and hold strong views that alternative tools can be used to mitigate the adverse impact of policy hikes (Figure 1.24). While South Asian countries face elevated inflation, some have aggressively raised policy rates (Section 1.6). Experts continue to see global commodity prices and supply chain disruption as the primary sources of inflation. Since most inflationary pressures are coming from abroad, South Asian countries are forced to delicately trade-off between support for economic recovery and policies that stabilize prices. However, only 37 percent of experts agree that central bank policy rate hikes effectively achieve the intended goal of curbing inflation, whereas 37 percent of the experts hold the opposite opinion (see also Box 1.3). Furthermore, only half of the experts agree that the benefits of monetary tightening outweigh the costs, such as rising borrowing costs. However, when asked whether

19 We received 47 responses from six countries: 34 percent are from India, 30 percent from Pakistan, 19 percent from Bangladesh, and less than 10 percent each from Nepal, Bhutan, and Sri Lanka; 72 percent identify as macroeconomists, 46 percent as policy advisors, and 9 percent as policymakers.