NEW YORK: World Bank has revised Pakistan’s growth rate upward to 5.2 percent for fiscal year 2017 and 5.5 percent for 2018.
The bank previously estimated growth in Gross Domestic Product (GDP) of Pakistan 5 percent and 5.4 percent respectively.
The report “Global Economic Prospects; weak investment in uncertain times”, released on Tuesday, states that the uptake in activity was spurred by a combination of low commodity prices, rising infrastructure spending, and reforms that lifted domestic demand and improved the business climate.
In Pakistan, growth is forecast to accelerate from 5.5 percent in fiscal year 2018 to 5.8 percent a year in fiscal year 2019-20, reflecting improvements in agriculture, infrastructure, energy, and external demand.
The report further mention the successful conclusion of Special Drawing Rights (SDR) 4.393 billion IMF Extended Fund Facility (EFF) program, aimed at supporting reforms and reducing fiscal and external sector vulnerabilities, lifted consumer and investor confidence.
The China Pakistan Economic Corridor (CPEC) project will increase investment in the medium-term, and alleviate transportation bottlenecks and electricity shortages.
High levels of non-performing bank loans (Bangladesh, India, Pakistan) make banks vulnerable to financial stress and weigh on new lending. In Pakistan, sovereign guarantees associated with the CPEC project elevate fiscal risks over the medium-term.
The report states that terrorist and militant attacks (Afghanistan, Bangladesh, Pakistan), political unrest (Bangladesh, Maldives, Nepal), and border disputes (India-Pakistan) presents risks to the region. If these intensify, risk premiums and financing costs could rise sharply. Furthermore, increased spending on security could exacerbate fiscal vulnerabilities.
The bank also set expected growth rate of India to downward on seven percent from earlier 7.6 pct.
The bank report also predicts slowing down of the Chinese economy and likely improvement in the economies of Russia and Brazil after stability in global oil prices.