Washington, 8 April 2026 – The World Bank has projected a slowdown in South Asia’s economic growth to 6.3% in 2026, down from 7.0% in 2025, as geopolitical tensions in the Middle East disrupt global energy markets and weigh on the region’s largely import-dependent economies.
The latest outlook highlights mounting external risks facing one of the world’s fastest-growing regions, where higher oil prices, inflationary pressures and policy tightening are expected to moderate economic momentum.
South Asia, which relies heavily on energy imports, is particularly vulnerable to supply disruptions and price volatility stemming from the ongoing conflict. The World Bank noted that elevated energy costs could trigger broader macroeconomic challenges, including rising inflation, tighter monetary conditions and weaker remittance inflows across the region.
Despite the near-term slowdown, the region is expected to remain the fastest-growing among emerging and developing economies, with growth projected to rebound to 6.9% in 2027, supported by stabilising conditions and structural resilience.
India continues to anchor regional growth, with the World Bank forecasting expansion of 7.6% in the fiscal year 2025/2026, before moderating to 6.6% in the following year.
Elsewhere, growth prospects vary significantly across the region: Bangladesh is expected to expand by 3.9% amid political uncertainties, Sri Lanka by 3.6% as it continues its recovery, and Bhutan by a stronger 7.1% driven by hydropower investments. Smaller economies such as the Maldives and Nepal are projected to grow at 0.7% and 2.3% respectively.
The report also underscores structural shifts in policymaking across South Asia, noting that governments are adopting industrial policies at a faster pace than other emerging markets. However, the effectiveness of such measures has been mixed, while import restrictions have reduced external dependencies, export-driven strategies have yet to deliver meaningful gains in competitiveness.
For investors, the outlook reinforces a key theme: while South Asia remains a high-growth region, its trajectory is increasingly influenced by global geopolitical dynamics, particularly energy market volatility and cross-border capital flows.
The World Bank’s warning comes amid a broader global recalibration, where conflicts and supply chain disruptions are reshaping growth expectations across multiple regions. For South Asia, maintaining growth momentum will depend on managing inflation risks, sustaining domestic demand and navigating an increasingly uncertain external environment.
