ADB: Pakistan’s econmy expected to grow by from -0.4% to 2% in FY2020-21

Pakistan’s economy is forecast to grow at a pace of 2% during the current fiscal year (2020-21), the Asian Development Bank (ADB) informed on Tuesday.

The prediction was subject to subsiding of the coronavirus and the resumption of structural reforms under the International Monetary Fund (IMF) program.

In its Asian Development Outlook (ADO) update, the Manila-based development bank raised its economic growth rate forecast for South Asia to 7.1% from 4.9% in June.

However, it kept Pakistan’s growth forecast unchanged at 2%.

Contrarily, it improved its growth forecast for China in 2021 to 7.7% instead of 7.3%.

Likewise, India was forecasted to grow by 8% from its earlier estimate of 5%-6%.

Whereas, the bank downgraded Bangladesh’s growth forecast to 6.8% instead of 8% earlier.

Similarly, Afghanistan’s growth rate was lowered to 1.5%, from about 4% estimated in June.

Moreover, regarding Pakistan, the ADB said the nation’s growth rate of 2% for FY2021 assumed that the Covid-19 impact would subside by the end of 2020, allowing global conditions to normalize and economic sentiment to improve.

It also assumed the structural reform’s resumption under an ongoing IMF Extended Fund Facility program to address macroeconomic imbalances.

On the supply side, agriculture was forecast to continue to lend impetus to the GDP growth. Growth in the industry is expected to improve in FY2021, led mainly by construction and small-scale manufacturing.

In addition to the normalization of worldwide economic conditions, improved market sentiment, and more robust business and consumer confidence expected with the easing of the coronavirus pandemic by the end of the first half of FY2021, a relatively low policy rate should facilitate the financing of industrial initiatives.

The ADB also expected the inflation is to slow to 7.5% in FY2021, lower than earlier forecasts driven by the expected economic recovery.

However, tempered by expenditure reform and the government’s decision to stop borrowing from the central bank, the money supply’s growth would slow down to 14.2% in FY2021.

Moreover, the fiscal deficit is forecast to decline to the equivalent of 7% of GDP in FY2021.

Revenue is projected to rise, reflecting ambitious revenue-mobilization targets following initiatives to withdraw tax exemptions, rationalize tax concessions, and broaden the tax base.

Meanwhile, the current account deficit is forecasted to remain at the equivalent of 2.4% of GDP in FY2021.

Exports are forecast to grow in FY2021 with the likely pickup in economic activity in Pakistan’s major trade partners, and as exports become more competitive thanks to government measures to decrease business costs.

Imports will rebound from a low base in FY2020 and respond to economic recovery in FY2021, despite higher tariffs on importing non-essential goods.

The ADB also anticipated continued progress in the balance of payments and foreign reserve position in FY2021. This prospect is due to a flexible, market-determined exchange rate regime adopted in early 2019.

Pakistan’s public debt is expected to decrease as the IMF stabilization program improves prospects for fiscal consolidation, and presuming rapid economic recovery from the COVID-19 pandemic.

Meanwhile, Pakistan remains at the rock bottom of the Global Wellness Index.

Pakistan secured only 27.24 marks on the Global Wellness Index, standing at 149th position among 153 nations. The Central African Republic, Chad, Nigeria, and Afghanistan were the only states that scored less than Pakistan.

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