ISLAMABAD: The World Bank says that economic growth in Pakistan is forecast to increase to 5.5 per cent in the fiscal year 2017-18, and reach an average of 5.9 per cent over the medium term on the back of continued robust domestic consumption, rising investment and a recovery in exports.

However, the main risks to the outlook are domestic, including fiscal slippages, increasing liabilities related to infrastructure projects, slippages relating to upcoming general elections and weak tax revenues that can derail fiscal consolidation efforts, warns the Global Economic Prospects report published by the bank on Wednesday.

The report says that in Pakistan growth accelerated in fiscal year 2016-17 to 5.3 per cent, somewhat below the government’s target of 5.7 per cent, as industrial sector’s growth was slower than expected. Activity was strong in the areas of construction and services and there was a recovery in agriculture production with a return of normal monsoon rains.

In the first half of fiscal year 2017-18, the activity continued to grow, driven by robust domestic demand and supported by strong credit growth and projects related to the China-Pakistan Economic Corridor.

Meanwhile, the current account deficit widened to 4.1 per cent of GDP compared to 1.7 per cent in the previous year, amid weak exports and increasing imports.

In South Asia, economic growth slowed to an estimated 6.5 per cent in 2017, marginally below the June 2017 forecast owing to temporary disruptions from adverse weather conditions across the region. The region’s growth prospects appear robust, with household consumption expected to remain strong, exports expected to recover, and investment projected to revive with the support of policy reforms and infrastructure improvements, according to the report.

Growth in the region is expected to pick up to 6.9 per cent in 2018, and stabilise to around 7.2 per cent over the medium term, but would remain slightly below June projections due to the weaker-than-expected recovery in domestic demand.

The forecast assumes strengthening of external demand as the recovery firms up in advanced economies amid supportive global financing conditions. Monetary policy is assumed to remain accommodative as modest fiscal consolidation continues in some countries.

Corporate debt overhangs and high levels of nonperforming loans have been longstanding concerns in some countries of the region. Setbacks in efforts to resolve these domestic bottlenecks will continue to weigh on investment, and more broadly on medium-term growth prospects in the region.

Recent adverse weather conditions have reduced agriculture output in some cases. Such developments continue to pose risks to regional growth. Recently, remittance inflows have been subdued due to fiscal consolidation and growth slowdowns in the Middle East, which constitutes roughly half of remittances to South Asia.

Outside India, fiscal consolidation slowed in 2017 as a result of revenue shortfalls and increased government spending in the Maldives and Pakistan. Current account deficits gradually widened across the region particularly in India, Bangladesh and Pakistan. In particular, non-performing loan ratios remained high, around 10 per cent, despite progress in some countries like Pakistan, Afghanistan and the Maldives, the report says.

Published in Dawn, January 11th, 2018

Opinion

Climate & youth

Climate & youth

Disillusionment and anxiety are on the rise among youth as they confront the diminishing prospects of a better tomorrow.
Our exclusivity syndrome
Updated 17 Oct 2021

Our exclusivity syndrome

Pakistan needs at least a minimum level of inclusivity that can keep alive democratic values.
Shafqat Kakakhel
Updated 16 Oct 2021

Shafqat Kakakhel

COP26 has to achieve consensus on several issues.

Editorial

Carnage in Kandahar
Updated 17 Oct 2021

Carnage in Kandahar

Pakistan’s anti-extremism policy is in many ways half-baked and inconsistent.
17 Oct 2021

Sanctity of contracts

PAKISTAN is facing yet another international dispute before the International Centre for Settlement of Investment...
17 Oct 2021

New sports policy

THIS week, the Pakistan Football Federation Normalisation Committee chief Haroon Malik was in Zurich to hold ...
Diminishing freedom
Updated 16 Oct 2021

Diminishing freedom

DESPITE the serious reservations of digital rights activists and tech companies, the federal government has...
16 Oct 2021

Dirty politics

IN her outburst against Prime Minister Imran Khan this week, PML-N leader Maryam Nawaz may not have taken names but...
16 Oct 2021

Decreasing emissions

THE announcement by SAPM on Climate Change Malik Amin Aslam that carbon emissions in the country came down by 9pc...