South Asia's economic growth will slow to 6.3% in 2026 from 7.0% in 2025 as Middle East conflict disrupts global energy markets, according to the World Bank.
The multilateral lender projects growth will recover to 6.9% in 2027, maintaining the region's position as the fastest-growing among emerging market economies.
India remains the primary growth engine, with output projected at 7.6% in fiscal 2025/26 before moderating to 6.6% in 2026/27.
Bangladesh forecasts 3.9% growth in fiscal 2025/26 recovering from political unrest. Bhutan expects 7.1% expansion driven by hydropower projects.
Sri Lanka projects 3.6% growth in 2026, down from 5.0% in 2025, pressured by higher energy costs. The Maldives faces sharp slowdown to 0.7% as tourism and financing conditions deteriorate.
World Bank President Ajay Banga warned the Middle East war will cause slower global growth and higher inflation regardless of conflict duration.
The bank highlighted South Asian countries implement industrial policies at double the rate of other emerging economies, though results remain mixed.