While the recent softening of commodity prices and supply chain bottlenecks should help in lowering inflation going ahead, risks to growth and investment outlook may rise if inflation persists at high level. Prioritising price stability, may therefore be the optimal policy choice in the current context for the region.
The approach to disinflation, however, needs to be mindful of the rising risks to the growth outlook in an environment of deteriorating prospects for global growth and trade activity. Containing External Debt Vulnerabilities 7. The surge in external debt in recent years and associated vulnerabilities have undermined macroeconomic stability in several countries of the South Asian region.