However, the outlook gives better picture of Pakistan's economy in 2007 to again take its growth rate up to 7.3 percent. The outlook indicates that Pakistan grew 8.4 percent in 2005, the fastest rate of growth in the last two decades, but inflation and current account that slipped from surplus to deficit emerged as big challenges for Islamabad.
The outlook adds that tightening of monetary policy is expected to bring inflation down to 8.5 percent this year and to 7.6 percent in 2007. According to the bank, Pakistan's medium-term outlook is favourable for growth in the range of 6-8 percent, assuming continued robust performance in economic management, greater investment to ease infrastructure bottlenecks, continued security and political stability.
The outlook gives encouraging picture of the South Asian countries and expects increase in growth to 7.3 percent by 2007.
INDIA India's growth has averaged more than 8 percent over the last three years driven by broad-based domestic demand and expansive business dynamics. Its GDP is projected to grow by 7.6 percent in 2006 and 7.8 percent in 2007, as consumption and investment demands are slightly held back by price adjustments to reduce domestic petroleum subsidies and somewhat higher interest rates.
AFGHANISTAN Afghanistan continued its solid track record of macroeconomic and structural reforms in 2005 and elections were held without major disruptions. Its growth is projected to remain strong at 11.7 percent in 2006 and 10.6 percent in 2007.
BANGLADESH The GDP growth in Bangladesh has been forecast at 6.5 percent in 2006, reflecting a steady increase in domestic and external demand, with moderation to 6 percent in 2007.
BHUTAN Bhutan has established a record of sustained solid growth based on utilisation of its vast hydropower resources for export, sound policies, and strong support from development partners. Its GDP growth is expected to rise about 2 percentage points each year to 10 percent in 2006 and 12 percent in 2007, as production from the 1,020 megawatt Tala hydropower project is phased online.
MALDIVES The Maldives was hit hard by the 2004 tsunami and its GDP fell to 5.5 percent in 2005. This followed a strong performance in 2004 with robust growth, increasing per capita income and macroeconomic indicators that reflected prudent policies. Its GDP is expected to grow 9 percent in 2006, moderate to 6 percent in 2007.
NEPAL In Nepal, the economy faltered in 2005, reflecting a weather-related decline in paddy production, disruption caused by insurgency, a downturn in tourism and continued weak growth in the industry. Its GDP growth is likely to slow down to 2 percent in 2006 because of poor weather affecting production of both winter and summer crops. The growth is projected to pick up to 3.4 percent in 2007.
SRI LANKA The economic impact of the tsunami on Sri Lanka was muted, despite its devastating human cost. Talks between the government and the Tamil Tigers in February 2006 have improved the overall climate on the status of the cease-fire.