• Says country’s recovery constrained by moderate confidence
• Notes developing Asia continues to grow robustly despite challenging global environment
ISLAMABAD: The Asian Development Bank (ADB) on Wednesday said Pakistan’s overall recovery was still constrained by moderate confidence and high inflation was eroding the purchasing power of its population.
In its December 2023 ‘Asian Development Outlook’, the Manila-based lending agency expected Pakistan’s inflation rate to ease from an average of 28.5pc in July-October, owing to fiscal consolidation and monetary tightening, as well as the improved availability of food and key imported inputs.
For the developing economies in the Asia-Pacific region, the ADB raised its economic forecast to 4.9pc this year compared to its previous 4.7pc estimate in September as robust domestic demand drove higher-than-expected growth in China and India. The outlook for next year has been kept unchanged at 4.8pc.
The ADB projected the Chinese economy to expand by 5.2pc this year, better than the previous forecast of 4.9pc, after household consumption and public investment boosted growth in the third quarter. Likewise, the growth outlook for India has been raised to 6.7pc from 6.3pc following faster-than-expected expansion in July-September, driven by double-digit growth in the industry.
“Developing Asia continues to grow at a robust pace despite a challenging global environment,” said ADB Chief Economist Albert Park. “Inflation in the region is also gradually coming under control. Still, risks remain, from elevated global interest rates to climate events like El Niño. Governments in Asia and the Pacific need to remain vigilant to ensure that their economies are resilient and that growth is sustainable”, he noted.
The region’s inflation outlook for this year has been lowered to 3.5pc from an earlier projection of 3.6pc, according to the ADB report. For the next year, inflation is expected to edge up to 3.6pc, compared with a previous forecast of 3.5pc.
On the other hand, the growth outlook for Southeast Asia this year has been lowered to 4.3pc from 4.6pc, amid weak demand for manufacturing exports. The outlook for economies in the Caucasus and Central Asia has been raised slightly, while projections for Pacific economies are unchanged.
Risks to the outlook include persistently elevated interest rates in the United States and other advanced economies, which could contribute to financial instability in vulnerable economies in the region, especially those with high debt. Potential supply disruptions caused by the El Niño weather pattern or the Russian invasion of Ukraine could also rekindle inflation, particularly regarding food and energy.
The ADB observed that economic performance in the major advanced economies had diverged, and oil prices remained volatile. The likelihood of a soft landing in the United States has increased. The GDP in the US continued to expand in the first half of 2023 and surprised on the upside in the third quarter.
In the US, growth accelerated to a seasonally adjusted annualised rate of 5.2pc in the quarter, spurred by a rapid increase in spending on goods and services. Despite a tight labour market, headline inflation continued to decelerate, slowing to 3.2pc in October, and personal consumption expenditure inflation fell to 3pc in the same month. Core inflation, however, has decelerated more slowly.
As for South Asia, the ADB improved its growth forecast for the region to 5.7pc in 2023, mainly due to higher-than-expected growth in India for the July-September quarter.
Growth forecasts for the sub-region for 2024 were maintained at 6pc, despite downward revisions in the forecasts for Bangladesh and Maldives. The 2024 growth projections for other South Asian economies, including Pakistan, remained unchanged.
Published in Dawn, December 14th, 2023
