Pakistan’s modest economic recovery to continue: World Bank

ISLAMABAD: Pakistan's fast growing remittances rising investments under the China Pakistan Economic Corridor (CPEC) have supported economic growth of the country, a World Bank's latest report said.

According to the report, Pakistan's modest economic recovery would continue.

However growth remains well below the 5.5 percent target envisaged in the Pakistan's Annual Plan and the South Asia average of 7.5 percent, the bank reported.

Pakistan's growth, the bank said, is expected to pick up to 4.5 percent from 4.2 percent.

Like the rest of the region, the country is benefitting supported by low oil prices, high remittances and CPEC investment from low oil prices, which have reduced the trade deficit (despite a notable decline in exports) and increased consumption, it said.

The World Bank is of the view that structural challenges prevent Pakistan from growing as quickly as its neighbours. The effects of the high remittances and low oil price windfall (driving such high growth rates in the rest of South Asia) are somewhat hampered in Pakistan by its continuing domestic structural challenges.

The bank said that the government is making progress on the structural reforms that will be essential to safeguard growth. It also said that the government has made great strides in increasing foreign exchange reserves and has recently made progress in the power sector and revenue reforms, but its ambitious reforms agenda is necessarily a medium- to long-term plan.

Given the risks presented by the current global economic situation, these reforms will be necessary to safeguard Pakistan's growth, the World Bank said.

In particular, the bank report observed that while low oil prices boosted consumption and reduced the import bill, sustained cheap oil may reduce public investment in GCC countries, ultimately lowering Pakistan's remittance receipts.

Private sector loans for long-term investment have increased substantially as compared to the corresponding period in the previous year.

However, while national savings tend to be the most reliable source of funds for investment, Pakistan's historical rate of savings has been very low.

National savings were 10 percent of GDP in the 1960s, increasing to 15 percent in the 2000s, but remaining below that level ever since.  The government's Annual Plan has identified a savings rate target of 16.8 percent.