The Asian Development Bank has projected that Pakistan’s economic growth rate will be 2.8% – the lowest in South Asia – and its inflation rate will be 12% – the highest in the bloc of eight nations, in this fiscal year. In the Asian Development Outlook Update 2019 released on Wednesday, the Manila-based lending agency has cut the economic growth rate forecast for Pakistan but markedly increased inflation projections compared to numbers in the ADO issued six months ago.
ADB has once again affirmed all the apprehensions about the flagging economy during the second year of Prime Minister Imran Khan’s government. Given the pressing need to address sizable fiscal and external imbalances, the economy is expected to slow further, with GDP growth projected at 2.8% in fiscal year 2019-20.
Earlier, the ADB had projected 3.6% growth rate for the current fiscal year.
The ADO update also raised the 2019-20 inflation projection for Pakistan to 12% in anticipation of planned tariff hikes for domestic utilities, higher taxes, and especially the lagged impact of currency depreciation.
The 12% projection was far higher than the ADB’s April 2019 forecast of 7% inflation for this fiscal year. While the Pakistan Tehreek-e-Insaf government has already twice increased electricity and gas tariffs, the ADB report revealed that another round of tariff hikes is on the cards.
The report said currency depreciation in a few economies – especially Georgia, Kazakhstan, and Pakistan – has directly raised prices of imported food goods and also impacted them indirectly through higher prices of imported fuel, fertiliser, and animal feed.
With a 2.8% growth rate, Pakistan’s economy will be the slowest growing economy in a bloc of eight South Asian nations. Like the last fiscal year, Bangladesh’s economy will be fastest-growing at a rate of 8%, followed by India at 7.2%, and the Maldives and Nepal at 6.3%. Even war-torn Afghanistan’s economy is projected to grow at a higher rate – 3.5% – than Pakistan’s.
Overall, South Asia’s growth momentum has softened and growth forecasts are lowered to 6.2% for 2019 and 6.7% for 2020. The GDP growth rate in Pakistan will decelerate for the third consecutive year – a time span that includes two years of the PTI-led government.