The World Bank has said that the successful completion of an IMF-supported program enhanced macroeconomic conditions and foreign direct investment (FDI) in Pakistan.
According to the World Bank’s “Global Economic Prospects: A Fragile Recovery” report for June 2017, growth in Pakistan is accelerating this year, largely driven by robust domestic demand and improved foreign direct investment.
Furthermore, the China-Pakistan Economic Corridor (CPEC) infrastructure project, as well as a stable macroeconomic environment, is contributing to an increase in private investment.
The agricultural output in Pakistan also rebounded following the end of a drought, supported by favourable weather and increased cotton prices.
The report states that Pakistan’s growth is expected to increase to 5.2 percent in fiscal year 2016-17 (July 1, 2016 – June 30, 2017) and remain strong over the forecast horizon, reflecting an upturn in private investment, increased energy supply, and improved security. The fiscal deficit should narrow further as a result of revenue-led fiscal consolidation.
Inflation has remained benign hovering below target in Pakistan. The favourable economic weather and lower oil prices have helped keep inflation low, and thereby made possible an accommodative monetary policy.
However, a number of downside risks continue to cloud the outlook. There could be setbacks to the assumed pace of structural reform which would impede the unlocking of supply constraints, dampen productivity growth, and hold up integration into global value chains.
The report states that security concerns in some countries such as Pakistan could also hold back investment and business confidence, while increased political or geopolitical tensions could pose major obstacles to economic and financial activity
The general elections in 2018 could be accompanied by heightened policy uncertainty, and election results could surprise financial markets.