The Asian Development Bank (ADB) reported on Wednesday that while Pakistan’s economic growth was likely to decelerate this fiscal year to 3.5 percent from around six percent in FY22 due to double-digit inflation, environmental challenges, and policy initiatives.
Due to disastrous floods, tighter policy, and urgent measures to address significant fiscal and external imbalances, the ADB reduced Pakistan’s growth expectations from 4.5 to 3.5 percent in the most recent version of the Asian Development Outlook.
According to the report, increased private consumption as well as growth in the industries of agriculture, services, and large-scale manufacturing were the main drivers of growth in FY22.
The recent floods that caused extensive devastation, according to ADB Country Director for Pakistan Yong Ye, have increased “deep risk to the country’s economic outlook.”
“We anticipate that flood-related rehabilitation and economic reforms will spark major financial support from abroad, spur economic expansion, and maintain social and development spending to safeguard the weak. ADB is putting together a package of assistance, restoration, and construction to help people, livelihoods, and infrastructure both now and in the future, the official said.
The lender stated in a news release that the restoration of political stability and continuing implementation of reforms in line with the International Monetary Fund (IMF) programme will have a significant impact on Pakistan’s economic prospects.
“In FY2022, private consumption increased by 10%, improving employment conditions and raising household incomes. Agriculture’s output increased by 4.4 percent in FY2022 thanks to successful crop and livestock seasons.
“Agriculture growth is expected to moderate due to flood damage and high input costs next year, which may diminish services growth, particularly wholesale and retail trade,” the release said.
The ADB update stated that fiscal adjustments and monetary tightening were expected to lead to a contraction in domestic demand in FY23, which along with capacity and input constraints due to the rupee’s depreciation, would reduce industry output.
Inflationary pressures would remain high in FY23 with the forecast rising to 18pc, it said.
“In addition to the floods, the elevated inflation rate along with possible fiscal slippages as general elections approach, and a higher-than-projected increase in global food and energy prices, remain downside risks to the outlook,” it concluded.
