Pakistan’s GDP to remain moderate in FY22, recover slightly in FY23: ADB

Islamabad: The Asian Development Bank Thursday projected that the Gross Domestic Product (GDP) growth in Pakistan was expected to moderate in FY2022 (ended 30 June 2022) on fiscal tightening measures to manage growing demand pressures and contain external and fiscal imbalances.

The growth in Fiscal Year 2023 is projected to recover slightly supported by structural reforms, the ADB said in its Asian Development Outlook (ADO) 2022 Supplement.

The report added that Pakistan’s inflation was marginally revised up for FY2022 and substantially so for FY2023.

In addition to the effects of elevated global energy and food prices, the government’s efforts to revive the stalled International Monetary Fund (IMF) program had meant raising power tariffs and withdrawing subsidies in the oil and power sectors.

The Asian Development Bank (ADB) also lowered its economic growth forecast for developing Asia and the Pacific to 4.6% this year due to slower expansion in the People’s Republic of China (PRC), more aggressive monetary tightening in advanced economies, and fallout from the continued Russian invasion of Ukraine.

The outlook compares with a projection of 5.2% issued by ADB in April.

The bank also raised its forecast for inflation in the region, amid higher prices for food and fuel.

Developing Asia and the Pacific is continuing its recovery from the COVID-19 pandemic.

Many countries are easing mobility restrictions, which is strengthening economic activity. However, growth has slowed in the PRC, the region’s largest economy, due to disruption from new COVID-19 lockdowns, as well as weaker global demand.

“The economic impact of the pandemic has declined across most of Asia, but we’re far from a full and sustainable recovery,” said ADB Chief Economist Albert Park.

“On top of the slowdown in the PRC, fallout from the war in Ukraine has added to inflationary pressure that’s causing central banks around the world to raise interest rates, acting as a brake on growth. It’s crucial to address all these global uncertainties, which continue to pose risks to the region’s recovery.”

The PRC’s economy is poised to expand 4.0% this year, compared with an earlier forecast of 5.0%. ADB also lowered its growth outlook for India to 7.2% from 7.5% amid higher-than-expected inflation and monetary tightening.

Inflation in developing Asia and the Pacific is predicted to accelerate to 4.2% this year, compared with a previous forecast of 3.7%. However, inflation pressure in the region as a whole is still lower than elsewhere in the world.

For 2023, ADB lowered its economic growth projection for the region to 5.2% from 5.3%, while raising the inflation forecast to 3.5% from 3.1%.

Growth forecasts for some subregions were upgraded. The outlook for Southeast Asia was raised to 5.0% this year from 4.9% amid increased domestic demand due to more relaxed COVID-19 restrictions.

The forecast for the Caucasus and Central Asia was raised to 3.8% from 3.6% as some economies in the subregion have withstood the economic fallout from Russia’s invasion of Ukraine better than expected. In the Pacific, rebounding tourism in Fiji helped the subregion’s growth outlook improve to 4.7% from 3.9%.