ADB forecasts 4% growth rate in 2021-22: Pakistan
The Asian Development Bank (ADB) has forecasted a 4% growth in Pakistan’s Gross Domestic Product (GDP) in the years 2021 and 2022; as a result of the gradual resumption of business activities in the second year of COVID-19.
According to the ADB 2021, the growth rate forecast has seen a resurgence in private investment as the ongoing vaccination process and various economic stimulus in the 2022 budget have restored consumer confidence and activated business. The report said that the investment sector is expected to strengthen due to the improvement in global perceptions and progress in the stabilization program in collaboration with the International Monetary Fund (IMF).
In terms of remittances, the agricultural landscape is encouraging in the context of the government’s plan to transform agriculture. The report claims:
“The project aims to expand arable land for a growing population, improve extension services, increase water use capacity, improve post-harvest storage and food processing plants, increase bank credit and seed. Hence, the farmers will be introduced to digital cards for direct and immediate transfer of subsidies for pesticides and fertilizers.”
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In this regard, ADB was said that in view of the growing growth in agriculture and industry and the expected improvement in domestic demand, the growth in the services sector will be accelerated, which will lead to an improvement in the growth rate in the year 2022.
According to the Asian Development Bank (ADB) report, inflationary pressures are likely to come from the ongoing economic recovery and rising global oil prices, but can be overcome by spending reforms and the government’s commitment not to borrow directly from the central bank. The report also included that the risk of inflation is higher than expected due to a sharp rise in oil prices or a possible depreciation of the currency in the wake of the imminent end of the ongoing IMF program.
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The IMF said:
“The fiscal deficit is projected to be 6.9 per cent of GDP in 2022, which is higher than the target set under the IMF-assisted Medium Term Financial Stabilization Program.”
“Domestic economic activity and imports are expected to boost revenue sharply”, the report continued.
ADB claims expenditure is also projected to increase in the year 22 as the government budgets for subsidies for the protection, development and economic rehabilitation of the weaker sections and a significant increase in social and development expenditure. The report said that Pakistan’s public debt scenario is sustainable in the medium term, with core and fiscal deficits, high borrowing costs and currency depreciation reaching 95.2 billion in the year 2021.
However, the government is pursuing a medium-term debt strategy for the fiscal year 2020-2023.
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In this regard, it was said that due to rising domestic demand and rising international oil prices, the current account deficit is expected to reach 1.5% of GDP in 2022, while exports are expected to increase. Imports are expected to increase in 2022 to boost the local economy, higher international oil prices and move customs and regulatory duties in the right direction in the 2022-23 budget.
The report further said that remittances are likely to increase through the Roshan Digital Accounts initiative and will continue to reduce the current account deficit.
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