Pakistan’s growth rate to go down to 3.9% this year, says ADB

ISLAMABAD: Pakistan’s economic growth rate to go down to 3.9% in fiscal year 2019, the Asian Development Bank (ADB) said in a forecast on the country’s economy.

The ADB in its publication titled “Asian Development Outlook (ADO) 2019,” said Pakistan’s GDP growth to drop to 3.9% in FY2019 as “macroeconomic challenges will continue despite steps to tighten fiscal and monetary policies.”

“The expansionary fiscal policy markedly widened the budget and current account deficits and drained foreign exchange,” the report observed.

The ADB report said inflation is expected to rise sharply to average 7.5% in FY2019, driven up by continued heavy government borrowing from the central bank, hikes to domestic gas and electricity tariffs, further increases in regulatory duties on luxury imports, and the lagged impact of currency depreciation by more than 10.7% since July 2018.

The water shortage would have an impact on the agriculture sector, which will fail to achieve its growth target, the bank’s report said.

The ADB report forecast further hike in inflation by the end of the fiscal year.

The report has predicted decrease in the current account deficit but said it will remain on the higher side.

The country would have to borrow more to payback the external debt, the report further said.

Inflation will remain elevated at 7.0% in FY2020, it added.

“Fixed investment in FY2018 reflected higher public investment in infrastructure and energy, especially under the China–Pakistan Economic Corridor (CPEC) project, including electric power projects,” ADB said.

“Net exports weighed on growth as imports grew considerably faster than exports to meet rising demand for oil and capital products, notably to support infrastructure projects.”

“Remittances are expected to revive—having already risen by 10% in the first 7 months of FY2019 over the same period of FY2018—as the Pakistan rupee depreciate further, economic activity in the Middle-eastern oil exporting countries (major destination of Pakistani migrants) holds broadly steady, and the government takes measures to facilitate remittances through official channels,” the bank report said.