World Bank raises South Asia growth forecast to 6.9% for 2026
World Bank projects South Asia growth of 6.9% in 2026 and 6.7% in 2027, flagging AI adoption gaps and risks from energy prices, El Niño and AI investment.
The story in focus
The World Bank expects South Asia's growth to rise to 6.9% this year, above earlier projections, on strong domestic demand, remittance inflows and recent structural reforms. Its latest regional outlook projects a slowdown to 6.7% in 2027 and examines how far firms and governments are adopting AI.
- Growth is forecast at 6.9% in 2026 and 6.7% in 2027.
- Roughly 23% of Indian firms report using AI, against 43% in the United States.
- Risks cited include elevated energy prices, a severe El Niño episode and a reversal in global AI investment.
Forecast and drivers
Released on October 6, the twice-yearly South Asia Economic Update, titled Adopting AI for Growth, projects regional growth of 6.9% in 2026, exceeding earlier projections. The World Bank attributes the strength to robust domestic demand following strong remittance inflows and recent structural reforms.
The report forecasts growth slowing to 6.7% in 2027 as headwinds mount. It names persistently elevated energy prices, which could raise inflation and tighten financial conditions, a severe El Niño episode that could affect agricultural output and food security, and a sharp reversal in global AI investment that could trigger financial strains.
AI adoption and public services
South Asia's AI adoption is rising but trails advanced economies. The report says around 23% of Indian firms report using AI, compared with 43% in the United States, and that the gap is wider for more sophisticated uses. It adds that analysis of recent data shows AI is expanding opportunities through global value chain links for South Asian suppliers heavily exposed to AI.
The report also points to public service delivery in health, education and agriculture, where skilled personnel are scarce. It cites AI-based weather forecasts delivered to smallholder farmers in India and AI-assisted retinal screening in Bangladesh, and says gains require tailoring tools to local conditions, including small applications that run on basic devices and limited connectivity.
Recommendations
The report recommends strengthening workforce skills, improving the business environment and physical and digital infrastructure, reducing barriers to AI adoption by small firms, fostering local AI innovation and establishing a clear regulatory framework that reduces uncertainty and safeguards data security and privacy.
What risks does the World Bank see to South Asia's growth outlook?
The report cites persistently elevated energy prices that could raise inflation and tighten financial conditions, a severe El Niño episode that could affect agricultural output and food security, and a sharp reversal in global AI investment.
Sources & further reading
- South Asia’s Strong Growth Defies Global Headwinds ↗worldbank.org
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