While domestic conditions remain solid in many economies, Afghanistan is facing a humanitarian crisis and Sri Lanka is facing dual balance of payments and sovereign debt crises.

The external environment has worsened markedly, with soaring energy and agricultural prices, slowing global growth, and rising financing costs. Growth is expected to slow from 7.6 percent in 2021 to 6.8 percent in 2022-0.8 percentage points below previous projections.

South Asia has endured significant adverse spillovers from the Russian Federation’s invasion of Ukraine. Risks to the baseline projections are tilted to the downside, and include further shocks to global growth, domestic stagflation, financial stress, and social unrest linked to sharply higher prices for food and energy. Recent high inflation is likely to extend monetary policy tightening cycles. The Russian Federation’s invasion of Ukraine has raised prices for many regional exports, but is likely to have a negative net effect on growth in LAC via weaker global trade and increases in input costs and consumer prices. Growth is set to slow further in 2023 to just 1.9 percent. The largest economies in LAC will be some of the slowest growing this year, dragging region-wide growth down to 2.5 percent. monetary tightening and global supply bottlenecks impart negative spillovers to the region. Elevated inflation, tighter financial conditions, and policy uncertainty are expected to take a toll domestically, while slowing growth in key export markets, U.S. Growth in Latin America and the Caribbean (LAC) is forecast to slow sharply in 2022 and remain weak in the following two years.

Outlook 2015 download