South Asia’s 6.9% Growth Forecast Puts AI, Jobs and Public Services in the Spotlight

Regional growth is projected to ease to 6.7% in 2027 as economic pressures build, with persistently high energy prices capable of pushing inflation higher and tightening financial conditions.

South Asia's economy is expected to grow by 6.9% in 2026, exceeding earlier projections as strong domestic demand helps the region withstand global shocks. The World Bank Group's latest twice-yearly South Asia Economic Update, Adopting AI for Growth, links this momentum to strong remittance inflows and recent structural reforms. Its assessment places the region's economic resilience alongside a growing opportunity to use artificial intelligence to improve productivity, expand business opportunities and strengthen services that people depend on.

Energy prices and climate risks could slow the momentum

Regional growth is projected to ease to 6.7% in 2027 as economic pressures build, with persistently high energy prices capable of pushing inflation higher and tightening financial conditions. A severe El Niño episode could damage agricultural output and worsen food insecurity, creating additional pressure on households and rural livelihoods. The report identifies a sharp reversal in global AI investment as another risk that could trigger financial strains, showing how developments in technology markets could affect the wider economic outlook.

Johannes Zutt, the World Bank's Vice President for South Asia, described the region as resilient in a challenging global environment and stressed the need for new sources of growth that can sustain momentum and create jobs. His message connects the expansion of global AI value chains with practical investments in workforce skills, infrastructure and conditions that support businesses. Countries' ability to make those investments will shape how effectively workers and firms participate in emerging opportunities and turn technological change into economic gains.

Businesses are adopting AI, with room to expand its use

AI adoption is accelerating across South Asia from levels well below those in advanced economies, with around 23% of Indian firms reporting that they use the technology compared with 43% in the United States. The gap becomes wider for more sophisticated applications, pointing to differences in how deeply businesses integrate AI into their operations. Firms in the region are using AI to identify new market opportunities, and the report's analysis of recent data shows expanding opportunities through global value chain connections for South Asian suppliers heavily exposed to AI.

The business opportunity extends beyond adopting individual tools, with the report examining how strategic use of AI can build new sources of growth across the region. Franziska Ohnsorge, the World Bank Group's Chief Economist for Asia, highlighted the technology's potential to raise labour productivity, expand exports and improve public service delivery. She stressed that governments need to address the foundational gaps holding back adoption, making the availability of skills, infrastructure and supportive institutions central to whether businesses and workers can capture these benefits.

Locally adapted tools could improve everyday public services

Health, education and agriculture offer significant opportunities for AI, particularly in places where skilled personnel are scarce, and frontline services face capacity constraints. Governments are using AI-based weather forecasts to support smallholder farmers in India and AI-assisted retinal screening in Bangladesh, providing examples of how the technology can serve practical needs. Evidence in the report shows that achieving useful results requires careful adaptation to local conditions, including small AI applications that operate on basic devices and limited connectivity.

The report recommends strengthening workforce skills, creating a business environment that supports investment and innovation, and improving physical and digital infrastructure so that AI adoption can reach more firms and communities. Reducing adoption barriers for small businesses and supporting local AI innovation would help broaden access to useful applications. Clear regulation is another essential part of the proposed approach, giving organisations greater certainty about how they can use AI and establishing safeguards for data security and privacy as adoption expands.