Pakistan's economy to grow at 3.5% in current financial year 2022-23 says ADB

 Asian Development Bank expect the inflation to remain around 18% in 2022-23

Asian Development Bank in its economic Outlook Update for Pakistan has lowered the GDP growth to 3.5% during the current financial year. In April, ADB projected that Pakistani economy will grow at the rate of 4.5%. But due to the prevailing political instability in the country and wide spread devastation caused by floods, ADB revised the growth rate of Pakistan’s economy.   

ADB has also projected that the inflation will remain around 18% during the financial year 2022-23. This is not good news for the government that is already struggling to revive the economy and to arrest the rising inflation. The PM Shahbaz Sharif led coalition government is already facing many political and economic challenges. This growth rate is lowest in the South Asia and inflation is second highest in the region.

According to the report, the economic outlook will also depend on the continued availability of adequate external financing under challenging domestic and global economic and political conditions.

The potential economic consequences of the recent floods heighten the already significant risks to the outlook, including an elevated inflation rate, possible fiscal slippage as general elections approach, and a higher-than-projected increase in global food and energy prices, stated the Manila-based lending agency.

The international lender said that inflation in South Asia is projected to rise to 8.1% in 2022 and to 7.4% from 5.5% in 2023. Compared to this, the inflation rate in Pakistan is projected to increase to 18%, due to a steep rise in inflation in the April–June period when fuel and electricity subsidies were removed, the rupee weakened against the US dollar, and international commodity prices surged.

The government has projected that the inflation rate may cross 27% in this fiscal year due to supply chain-related disruptions.

Agricultural growth is expected to moderate on high input costs, including electricity, fertilisers, and pesticides. Slower growth in agriculture and industry will in turn diminish services growth, particularly wholesale and retail trade.

The lender further added that, compared to the last fiscal year, Pakistan’s current account deficit will narrow this fiscal year to around 3% of the GDP. Exports and remittances will rise, supported by improved confidence, a flexible exchange rate, and the continuation of the central bank’s export facilitation scheme. Import growth will also slow on moderating economic growth and the rupee’s depreciation, added report.

ADB cautioned, however, that while foreign capital inflows are expected to increase, financing challenges will remain given the large sums needed to cover the current account deficit and service debt repayments.

                                                                     Khalid Bhatti