South Asia Economic Outlook
In 2026, our Consensus is for South Asia’s economic growth to remain the fastest in the world, led by India. That said, the smaller South Asian economies are projected to expand at more sudued paces due to relatively tight monetary policy, government austerity and political instability. A collapse in India-U.S. trade talks is the main downside risk.
South Asia Inflation
In December, average South Asian inflation rates rose to 2.3% from November’s 1.9%, as price pressures rose in Bangladesh and India. After plunging to multi-year lows in 2025 due to sinking oil and food costs, inflation should pick up in 2026 as interest rates fall. Still, inflation will remain below trend as commodity prices remain subdued.
This chart displays Economic Growth (Real GDP, ann. var. %) for South Asia from 2010 to 2025.
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| Merchandise Trade Balance (USD bn) | -146 | -260 | -338 | -276 | -328 |
| Economic Growth (Real GDP, ann. var. %) | -4.3 | 8.9 | 7.2 | 7.9 | 6.0 |
| Policy Interest Rate (%, eop) | 4.35 | 4.59 | 7.27 | 7.81 | 7.14 |
| GDP per Capita (USD) | 1,899 | 2,203 | 2,309 | 2,414 | 2,570 |
| Merchandise Exports (USD bn) | 357 | 502 | 548 | 528 | 529 |
| Inflation (CPI, ann. var. %, aop) | 6.4 | 5.9 | 8.6 | 7.9 | 5.7 |
| International Reserves (USD bn) | 644 | 679 | 624 | 686 | 714 |
| Private Consumption (annual variation in %) | -4.2 | 10.9 | 7.3 | 4.8 | 6.9 |
| Merchandise Imports (USD bn) | 503 | 762 | 886 | 805 | 856 |
| Investment (annual variation in %) | -5.9 | 15.1 | 7.9 | 5.9 | 6.3 |
| External Debt (% of GDP) | 23.8 | 22.2 | 21.4 | 21.3 | 21.3 |
| Industrial Production (ann. var. %) | -7.0 | 11.3 | 5.8 | 6.2 | 4.0 |
| Fiscal Balance (% of GDP) | -8.6 | -6.4 | -6.4 | -5.6 | -4.8 |
| Public Debt (% of GDP) | 82.1 | 78.1 | 77.5 | 77.0 | 77.3 |
| Current Account Balance (% of GDP) | 0.4 | -1.2 | -2.4 | -0.9 | -0.6 |
| Unemployment (% of active population, aop) | 5.9 | 5.7 | 5.3 | 6.1 | 6.1 |