ISLAMABAD, March 21: The Asian Development Bank on Sunday forecast a 5.5 per cent GDP growth rate in Pakistan during the current fiscal year against a target of 5.3pc, owing to higher tax collection and expected better output by the agriculture and manufacturing sectors.

At the same time, the ADB predicted inflation at 4.2pc, higher than the 4pc target, and showed concern over sharp deceleration in textile exports in the second half of the current fiscal.

In its half-yearly report 'Pakistan Economic Update, July-December 2003' released on Sunday, the bank shows worries about future bedwear and rice exports owing to a European Union's decision to impose anti-dumping duty on bedwear and the threat of ending duty-free access for certain varieties of Basmati rice.

The report depicts 'a sharp deceleration in textile exports in the second quarter when their growth declined to 7.5pc from 16.6pc in the first quarter'. "The sharpest slow down was seen in the bedwear exports which declined by 14.8pc in contrast with an increase of 33.4pc in the first quarter. The decline resulted mainly from lower volume," the ADB said.

With the imposition of anti-dumping duty by the EU sometime this month, further decline in bedwear exports is expected. Export of primary commodities increased by only 1.4pc.

The ADB has noted that expenditure on safety nets declined by 12.3pc. Similarly, the data showed that disbursement of Zakat in three provinces fell to Rs146 billion from Rs249 billion in the corresponding period last year.

Strong revenue growth indicates that the revenue and fiscal targets for the current year should be easily achieved. Robust growth in exports, as well as high level of remittances, point to a comfortable balance-of-payments position for the year. Thus, the economy seems to be moving to a high-growth path.

Agriculture and large-scale manufacturing sectors have shown substantial improvement. Of the three major summer crops, rice and sugarcane are estimated to be larger than what they were last year. The initial estimates show an increase in area under wheat over last year.

Growth in large-scale manufacturing was almost three times the growth last year, with more pronounced increases being recorded in automobiles, electronics, leather products, cement, and metal products.

Inflation in the first half of the year was lower than that in the first half of 2003. There was an improvement in fiscal position in the first half of the current year, with the fiscal deficit declining to 0.8pc of GDP compared to 1.6pc in the first half of 2003. Revenues increased by 13.9pc, while expenditure increased by only 3.6pc.