At first glance, South Asia’s economy appears to be defying gravity.
The region grew by about 7 per cent in 2025, making it the fastest-growing emerging market in the world. Even with a projected slowdown to 6.3 per cent in 2026, the numbers still look strong. But beneath that headline performance, a more complicated story is emerging, one that carries important lessons for countries like Uganda.
The World Bank’s South Asia Economic Update warns that growth across the region is increasingly shaped by forces beyond its control. Energy shocks, geopolitical tensions, and shifting global trade rules are beginning to constrain economies that once relied on steady export-led expansion.
In simple terms, growth is holding, but the foundations are less secure.
This vulnerability is driven largely by dependence on imported energy. Disruptions in global supply routes, particularly around key chokepoints like the Strait of Hormuz, have made energy costs unpredictable. At the same time, rising tariffs in major markets such as the United States are reshaping trade flows, forcing exporters to adapt quickly or lose competitiveness.
For Uganda, the parallels are difficult to ignore.
Like South Asia, Uganda’s growth is deeply exposed to external shocks, whether through oil price volatility, imported inflation, or shifting demand in global markets. The lesson is not that growth is impossible, but that it can be fragile if it relies too heavily on forces beyond national control.
There is also a quieter shift happening within South Asia’s economies, one that may be even more significant.
While macroeconomic indicators suggest stability, underlying sentiment is becoming more cautious. Growth is increasingly concentrated in a few areas, particularly domestic demand in India and services exports. But these drivers, the report suggests, are not guaranteed to hold.
“The quality of growth is deteriorating,” the analysis implies, as expansion becomes narrower and less inclusive.
Uganda faces a similar pattern.
In recent years, growth has leaned heavily on services such as telecommunications and finance, while manufacturing remains underdeveloped. The risk is that without deeper industrial capacity, the economy becomes more vulnerable to shocks and less able to generate broad-based employment.
That brings into focus one of the report’s most important findings: the real constraint on growth is not policy ambition, but structural weakness.
Across South Asia, exports account for only about 12 per cent of GDP, half the level seen in other emerging economies. Trade barriers remain high, labour markets are slow to transform, and institutional capacity limits the effectiveness of reforms.
These are not abstract challenges. They shape how economies function and how people find work.
In response, governments across the region have turned increasingly to industrial policy. Since 2020, the use of such interventions has doubled. But the results have been mixed.
Measures like industrial parks, infrastructure investment, and skills development have shown promise. By contrast, trade protection and broad subsidies have often failed to deliver meaningful gains in competitiveness.
The deeper driver behind this shift is not purely economic. Governments are also using industrial policy to manage political pressure, creating jobs, balancing regional inequalities, and maintaining social stability.
Uganda’s experience reflects the same tension.
Efforts to promote manufacturing and agro-processing have often struggled to translate into exports or large-scale job creation. Protection without productivity gains risks shielding industries without making them competitive.
Perhaps the most striking insight from the report, however, lies in the future.
Artificial intelligence is already beginning to reshape labour markets in South Asia. The analysis finds that increased exposure to AI is linked to a 1.5 per cent decline in job postings, rising to nearly double that in firms connected to global markets.
For a region that has long relied on labour-intensive services, this is a profound shift.
It suggests that even the path many developing countries hoped to follow, moving from agriculture to services, may no longer guarantee jobs.
For Uganda, which is investing in digital services and business process outsourcing, the implications are clear. The window for labour-driven growth may be narrowing faster than expected.
There is, however, a counterpoint.
Trade reform continues to offer tangible gains. In South Asia, new agreements and tariff reductions are expected to raise real incomes and benefit poorer households the most. It is a reminder that, despite global trends toward protectionism, openness still matters.
For Uganda, initiatives such as the African Continental Free Trade Area carry similar promise, if they are fully implemented.
In the end, the South Asia story is not one of failure, but of transition.
Growth is still happening. But it is becoming more complex, more contested, and more dependent on how countries navigate a rapidly changing global landscape.
For Uganda, the message is both cautionary and instructive.
The old model—cheap labour, gradual industrialisation, and steady export growth—is no longer enough. The challenge now is to build resilience, deepen domestic capacity, and create jobs in an economy where the rules are already shifting.