‘ADB report on Pakistan’, GDP growth rate to remain low
Asian Development Bank (ADB) has forecast Pakistan’s Gross Domestic Product (GDP) growth to decelerate to 3.9 percent in fiscal year (FY) 2019 following pronounced widening of country’s balance of payments deficit in 2018.
In its flagship economic publication ‘Asian Development Outlook (ADO) 2019, ADB said that decline is on “macroeconomic challenges continue and despite steps to tighten fiscal and monetary policies to rein in high and unsustainable twin deficits.”
For FY2018, ended June 30, 2018, estimated GDP growth rate was revised downward from earlier 5.8 percent to 5.2 percent. Growth therefore slowed from 5.4 percent a year earlier. The growth decelerated despite revived agriculture. The expansionary fiscal policy markedly widened budget and Current Account deficits and drained foreign exchange,” report observed.
“Until macroeconomic imbalances are alleviated, outlook is for slower growth, higher inflation, pressure on currency and heavy external financing needed to maintain even a minimal cushion of foreign exchange reserves. Recurrent crises in balance of payments require that firms become more export competitive,” it added.
ADB report said that inflation was expected to rise sharply to average 7.5 percent in FY2019, driven up by continued heavy government borrowing from central bank, hikes to domestic gas and electricity tariffs, further increases in regulatory duties on luxury imports and lagged impact of currency depreciation by more than 10.7 percent since July 2018.