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Fibre2Fashion
25-04-2025
- Business
- Fibre2Fashion
South Asia's economic growth projected to slow in 2025: World Bank
South Asia's growth is projected to slow to 5.8 per cent in 2025, 0.4 percentage points (ppts) below the October forecast, before recovering to 6.1 per cent in 2026, according to the World Bank's latest South Asia Development Update, titled 'Taxing Times'. This outlook is vulnerable to increased risks, including a highly uncertain global environment and domestic challenges, such as limited fiscal capacity. South Asia's growth outlook has weakened, with projections revised down for most countries in the region due to rising uncertainty in the global economy. Stepping up domestic revenue mobilisation could help the region strengthen fragile fiscal positions and increase resilience against future shocks, the World Bank said in its twice-yearly regional outlook. For India, the growth is expected to slow from 6.5 per cent in FY24/25 to 6.3 per cent as in FY25/26 as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty. South Asia's growth is projected to slow to 5.8 per cent in 2025, down 0.4 ppts from previous forecasts, with risks from global uncertainty and domestic challenges. India's growth will slow to 6.3 per cent, while Bangladesh and Pakistan face slower recovery. The World Bank urges increased domestic revenue mobilisation to strengthen fiscal positions, recommending tax reforms and digital technology. In Bangladesh, growth is expected to slow in FY24/25 to 3.3 per cent amid political uncertainty and persistent financial challenges, and the growth rebound in FY25/26 has been downgraded to 4.9 per cent. Pakistan's economy continues to recover from a combination of natural disasters, external pressures, and inflation, and is expected grow by 2.7 per cent in FY24/25 and 3.1 per cent in FY25/26. Meanwhile, in Sri Lanka, the government has made further progress with debt restructuring, and a projected rebound in investment and external demand is expected to lift growth in 2025 to 3.5 per cent before it returns to 3.1 per cent in 2026. 'Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment,' said Martin Raiser, World Bank vice president for South Asia . 'The region needs targeted reforms to strengthen economic resilience and unlock faster growth and job creation. Now is the time to open to trade, modernise agricultural sectors, and boost private sector dynamism.' A key component of strengthening economic resilience will be domestic revenue mobilisation. Although tax rates in South Asia are often above the average in developing economies, most tax revenues are lower. On average during 2019–23, government revenues in South Asia totalled 18 per cent of GDP—below the 24 per cent of GDP average for other developing economies. Revenue shortfalls are particularly pronounced for consumption taxes but are also sizable for corporate and personal income taxes, World Bank said in a press statement. Tax revenues in South Asia are estimated to be 1 to 7 ppts of GDP below their potential, based on existing tax rates. Some of this shortfall is explained by the widespread informality and large agricultural sectors in the region. However, even after taking this into account, sizable tax gaps remain, highlighting the need for improved tax policy and administration. 'Low revenues are at the root of South Asia's fiscal fragility and could threaten macroeconomic stability, especially in times of elevated uncertainty,' said Franziska Ohnsorge, World Bank chief economist for South Asia. 'South Asian tax rates are relatively high, but collection is weak, leaving those who pay taxes with high burdens and governments with insufficient funds to improve basic services.' The report recommended a range of policies to improve tax revenues by eliminating loopholes, streamlining tax codes, tightening enforcement, and facilitating tax compliance. This includes paring back tax exemptions; simplifying and unifying the tax regime to reduce incentives to operate in the informal sector; and using digital technology to identify taxpayers and facilitate collection. The report noted the potential of adopting pollution pricing, which could help address the high levels of air and water pollution while raising government revenues. Fibre2Fashion News Desk (SG)
Arab News
24-04-2025
- Business
- Arab News
World Bank projects 2.7 percent growth for Pakistan in FY2025
ISLAMABAD: Pakistan's economy is projected to grow by 2.7 percent in the fiscal year ending June 2025, the World Bank said on Wednesday, indicating signs of stabilization amid easing inflation and improved financial conditions. The World Bank, in its latest report titled 'Reimagining a Digital Pakistan,' said the real GDP growth is expected to benefit from a rebound in private consumption and investment, driven by easing inflation, lower interest rates and improving business confidence. This improvement in Pakistan's economy is supported by declining inflation, which fell to 1.5 percent in February, prompting the central bank to reduce its policy rate to 12 percent after a series of cuts totaling 1,000 basis points since June 2024. Despite these positive indicators, the country faces significant external financing challenges, including over $22 billion in external debt repayments, highlighting the need for continued structural reforms and fiscal consolidation. 'Pakistan's economy continues to stabilize and is expected to grow by 2.7 percent in the current fiscal year ending June 2025, up from 2.5 percent in the previous year,' the World Bank said. It added that agricultural growth remained modest due to unfavorable weather conditions and pest outbreaks while industrial activity weakened due to rising input costs, increased taxation and cuts in government expenditure. The report said growth in Pakistan's services sector remained 'muted' due to spillover effects from weak agricultural and industrial activity, which will make it challenging for the government to create jobs and reduce poverty. 'Pakistan's key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction,' World Bank Country Director for Pakistan, Najy Benhassine, said. 'High-impact reforms to prioritize an efficient and progressive tax system, support a market-determined exchange rate, reduce import tariffs to boost exports, improve the business environment and streamline the public sector would signal strong reform commitment, build confidence, and attract investment.' The report said real GDP growth was expected to rise to 3.1 percent in FY26 and 3.4 percent in FY27 due to the predicted ongoing macroeconomic stabilization and the implementation of key economic reforms. 'The April 2025 edition, Taxing Times, projects regional growth to slow to 5.8 percent in 2025 — 0.4 percentage points below October projections — before ticking up to 6.1 percent in 2026,' the World Bank said. 'This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities including constrained fiscal space.'
Hans India
24-04-2025
- Business
- Hans India
World Bank trims India's GDP growth to 6.3% in FY26
New Delhi: The World Bank on Wednesday lowered India's growth forecast for the current fiscal by 4 percentage points to 6.3 per cent amid global economic weakness and policy uncertainty. In its previous estimate, the World Bank had projected India's growth at 6.7 per cent for the fiscal year 2025-26. In India, growth in FY24/25 disappointed because of slower growth in private investment and public capital expenditures that did not meet government targets, the World Bank said in its twice-yearly regional outlook. 'In India, growth is expected to slow from 6.5 per cent in FY24/25 to 6.3 per cent as in FY25/26 as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty,' said its South Asia Development Update, Taxing Times. On Tuesday, the International Monetary Fund (IMF) also lowered India's GDP forecast for the current fiscal to 6.2 per cent from its January estimates of 6.5 per cent. The World Bank report said the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty. 'Private consumption is expected to benefit from tax cuts, and the improving implementation of public investment plans should boost government investment, but export demand will be constrained by shifts in trade policy and slowing global growth,' it said. It further said that amid increasing uncertainty in the global economy, South Asia's growth prospects have weakened, with projections downgraded in most countries in the region. Stepping up domestic revenue mobilisation could help the region strengthen fragile fiscal positions and increase resilience against future shocks, it said. The Washington-headquartered multilateral agency has projected regional growth to slow to 5.8 per cent in 2025, 0.4 percentage points below October projections before ticking up to 6.1 per cent in 2026. This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities, including constrained fiscal space.
Business Recorder
23-04-2025
- Business
- Business Recorder
Highest, income groups be taxed at higher effective rates: WB
ISLAMABAD: The World Bank has recommended that highest-income groups be taxed at higher effective rates while income tax regime in Pakistan can be made more progressive by removing exemptions for high income groups and raising the income bracket of the highest tax rate. The bank in its latest report, 'South Asia Development Update, Taxing Times', also noted that industrial output contracted, driven by high input costs, increased taxes, and lower government development spending, and services growth was dampened by spillovers from weak agricultural and industrial activity. Pakistan, ranks among the Emerging Market and Developing Countries (EMDEs) with the widest range of tax rates and the widest range of income thresholds across personal income tax brackets, which makes its income tax regime relatively progressive. Pakistan's poverty rate to stand at 42.4%: World Bank In Pakistan, the government has committed to raising tax revenues by the equivalent of 4–5 percentage points of GDP, reforming the energy sector, and allowing the exchange rate to be flexible, it added. Pakistan provides a guaranteed price for sugarcane production, while subsidizing its consumption of water. Such subsidies that encourage the wasteful use of inputs could be replaced by direct, targeted transfers, with higher transfers for farmers that adopt sustainable land management practices, the report noted. Only Pakistan's tax buoyancy falls in the bottom quartile of EMDEs, suggesting a reliance on taxation of slow-growing economic activities. In all South Asian countries other than Bhutan and Pakistan, greater shares of tax revenues are generated by consumption taxes—such as sales tax, excise taxes, and VAT—and trade taxes than in the average EMDE, with smaller shares derived from income taxes. In Pakistan and Sri Lanka, consumption tax rates were well above the EMDE average in 2024. The report further noted that Pakistan, Sri Lanka, and Bangladesh—the three South Asian countries with the lowest overall revenue-to-GDP ratios—also have much lower tax revenue-to-GDP ratios compared with other EMDEs with similar tax rates in all categories of taxes. Since 2020, Afghanistan, Bangladesh, Pakistan, and Sri Lanka have had sizable shortfalls in direct tax revenue, ranging from 1.4 percentage points of GDP to 2.6 percentage points of GDP, compared with an average shortfall of 0.8 percentage point among all EMDEs. In these four South Asian countries, revenue shortfalls have been nearly evenly split between personal income tax revenues and corporate income tax revenues. Among four countries including Bangladesh, Bhutan, Pakistan and Sri Lanka, with above-average tax revenue shortfalls, the country characteristics account for one quarter of the overall shortfalls in Bangladesh and Bhutan and one-third in Pakistan and Sri Lanka. In particular, widespread informality and lack of financial development account for one-half, one-third, and one-quarter of the shortfall in personal income tax revenues in Bhutan, Pakistan, and Sri Lanka, respectively. A large agriculture sector and lack of financial development together account for one-half of the shortfall in corporate income tax revenues in Bangladesh, Pakistan and Sri Lanka, as well as one-third of the shortfall in consumption tax revenues in Pakistan and Sri Lanka. But even after controlling for these country characteristics, the four countries still have tax gaps that are larger than the EMDE average. The assessment for Pakistan identifies compliance risk management, the timeliness of tax declaration filings, tax dispute resolutions, and tax payments, as well as the monitoring of inaccurate reporting as the main areas needing improvement. In Pakistan, the introduction of electronic VAT filing and computerized risk analysis reduced refund claims by one-half and led to the detection of a significantly larger number of fraudulent claims than had manual assessments. Responsiveness of revenues to changes in tax bases in Bangladesh and India is comparable to that in other emerging market and developing economies (EMDEs); in Nepal responsiveness is in the top quartile of EMDEs, and in Pakistan it is in the bottom quartile. In Bangladesh and India, tax buoyancies are broadly in line with those of other EMDEs, whereas Nepal's tax buoyancy ranks in the top quartile of EMDEs and Pakistan's in the bottom quartile. Below-average tax buoyancies, as in Pakistan, indicate that economic growth is disproportionately generated by under-taxed economic activities. In Pakistan, the agriculture sector accounted for about one -fifth of cumulative growth during 2010–19, compared with less than one-tenth in the average EMDE. In many parts of Pakistan, the agriculture sector faces considerably lower income tax rates than do non-agriculture sectors. A priority for raising tax revenues is therefore to increase taxation of agricultural activity. The report also noted that in Pakistan, the economy continues to recover from a combination of natural disasters, external pressures, and inflation, and is expected grow by 2.7 percent in fiscal year 2024-25 and 3.1 percent in fiscal year 2025-26. In Pakistan, GDP grew by 2.5 percent in fiscal year 2023-24, after a small contraction in fiscal year 2022-23. Robust remittance inflows supported private consumption, but private investment growth continued to be weak, dampened by double-digit real interest rates and political uncertainty. On favorable weather conditions, agricultural growth reached a 19-year high while industrial activity contracted and services growth remained muted. Weak growth has carried over to first half of fiscal year 2024-25. Output increased by an average of 1.5 percent y-o-y in the first half of fiscal year 2024-25, slower than the 2.1 percent expansion in the first half of the previous year. After last year's surge, agriculture posted muted growth in the first half of fiscal year 2024-25 amid drought-like conditions and pest infestations. The government achieved a primary surplus in the first half of fiscal year 2024-25, with fiscal consolidation efforts supported by an IMF program. The current account was in surplus at the end of 2024, helped by higher remittances, stemming from reduced political uncertainty and exchange rate stability, that more than offset the wider trade and primary income deficits. With depreciation pressures on the currency subsiding, a robust agricultural harvest, and administrative prices stabilizing, inflation declined steadily to 0.7 percent in March 2025 from its peak of nearly 40 percent in mid-2023. This allowed the central bank to lower its policy rate by 10 percentage points since June 2024 to 12 percent in January. Copyright Business Recorder, 2025
Economic Times
23-04-2025
- Business
- Economic Times
World Bank cuts FY26 growth forecast for India to 6.3%, flags weak tax collection
The World Bank projects India's economic growth to slow to 6.3% in the current fiscal year, citing global economic uncertainty. The report emphasizes the need for India to enhance domestic revenue mobilization to bolster resilience against future economic shocks. It highlights that low tax revenue collection, stemming from a large informal economy and agriculture sector, contributes to fiscal fragility. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads ( Originally published on Apr 23, 2025 ) India's economic growth is expected to slow down to 6.3% in the current financial year from the projected 6.5% growth in FY25 due to global economic uncertainty, the World Bank said in a report, adding that the country needs to step up domestic revenue mobilisation to increase resilience against future South Asia Development Update report, titled 'Taxing Times', said that although tax rates in South Asia are often above the average in developing economies, tax revenue collections are lower than its potential, including in India."Low revenues are at the root of South Asia's fiscal fragility and could threaten macroeconomic stability, especially in times of elevated uncertainty," said Franziska Ohnsorge, World Bank chief economist for South average during 2019-23, government revenues in South Asia totalled 18% of GDP-below the 24% of GDP average for other developing economies, highlighting the need for improved tax policy and administration."South Asian tax rates are relatively high, but collection is weak, leaving those who pay taxes with high burdens and governments with insufficient funds to improve basic services," said report attributed low tax collection to widespread informal economy and a large agriculture sector, which account for half of the shortfall in corporate income tax report estimated that India lost 5% of corporate income tax revenues in 2021 due to the shifting of profits of multinational corporations into tax added that global tax reforms, such as the Organisation for Economic Co-operation and Development (OECD)'s proposed global tax, could have benefited South Asia, potentially generating average net revenues of 1.8-2.6% of 2025 corporate income tax report suggested policies to improve tax revenues like streamlining tax codes, tightening enforcement, and facilitating tax compliance."This includes paring back tax exemptions; simplifying and unifying the tax regime to reduce incentives to operate in the informal sector; and using digital technology to identify taxpayers and facilitate collection," the report also suggested adopting pollution pricing, which could also help address high levels of air and water pollution while raising government revenues.
