ADB predicts 3.9pc GDP growth rate for Pakistan in fiscal year 2019

ADB predicts GDP growth rate for Pakistan in fiscal year 2019
Mandaluyong: The Asian Development Bank (ADB) on Wednesday has prophesized that Pakistan’s GDP growth rate will plummet to 3.9pc in fiscal year 2019.

ADB cited widening balance of payment deficit a reason behind slowing down of growth rate.

ADB—in its economic publication titled as Asian Development Outlook 2019—stated that GDP growth rate will continue to witness upward trajectory as ‘macroeconomics challenges continue and despite steps to tighten fiscal and monetary policies to rein in high and unsustainable twin deficits.”

“For FY2018, ended 30 June 2018, the estimated GDP growth rate [was] revised downward from earlier 5.8% to 5.2%. Growth therefore slowed from 5.4% a year earlier. The growth decelerated despite revived agriculture. The expansionary fiscal policy markedly widened the budget and current account deficits and drained foreign exchange,” read the report.

 

Source: Asian Development Bank

 

“Until macroeconomic imbalances are alleviated, the outlook is for slower growth, higher inflation, pressure on the currency, and heavy external financing needed to maintain even a minimal cushion of foreign exchange reserves. Recurrent crises in the balance of payments require that firms become more export competitive,” added the report.

The ADB report predicts that inflation is expected to soar to average 7.5% in FY2019, driven up by continued heavy government borrowing from the central bank, hikes to domestic gas and electricity tariffs, further increases in regulatory duties on luxury imports, and the lagged impact of currency depreciation by more than 10.7% since July 2018.

Inflation will remain elevated at 7.0% in FY2020, it added.