Growth beats ADB’s forecast on agriculture revival

KARACHI: The country’s growth estimate for the last fiscal year of 2016/17 remained above the Asian Development Bank’s forecast due to agriculture sector’s turnaround as well as growing consumer demand and upbeat construction activities, the Bank said on Thursday. 

ADB, in a supplement to its flagship Asian Development Outlook (ADO) 2017 report, said the preliminary growth estimate for the fiscal year ended 30 June, 2017 by the government “beat ADO 2017 forecast.”

“In Pakistan, growth was supported by a revival in agriculture, as well as by continued expansion in construction and steady growth in services,” the bank said. “Strong private consumption remained the largest contributor to growth.”

Government estimated growth at 5.3 percent for FY17, which was 10-year high. In April, ADO 2017 said the growth might edge up to 5.2 percent.  Agriculture sector registered a robust 3.46 percent growth during the last fiscal year as all the major crops, including wheat, cotton, sugarcane and maize turned out healthy outputs. 

Healthy crops performance in Pakistan even created an impact in the international market with sugar price hitting a 13-month low. “After increasing year on year in the first 4 months of the year, international sugar prices were down by 28.5 percent year on year in June… with expectations of better output in Brazil and larger exports from Pakistan,” Manila-based lender said in the supplement.

Government is encouraging sugar exports due to its availability in surplus in the country. Pakistan produces around six million tonnes of sugar a year, while demand hovers around 4.5 million tonnes.

In FY17, Pakistan’s industrial sector also posted 5.02 percent growth, while services sector grew 5.98 percent. 

The supplement further termed the economic outlook for South Asia robust and maintained the ADO 2017 growth projections of 7 percent for 2017 and 7.2 percent for 2018.  

Bangladesh’s growth also beat the outlook because of agriculture sector’s growth and solid performances in wholesale and retail trade, real estate, hotels and restaurants and transport. 

In India, growth slowed to 7.1 percent in the fiscal year ended 31 March 2017 from 8 percent in the previous fiscal year due mainly to the demonetisation and replacement of high-denominated banknotes, which affected economic activities in several cash-dependent sectors. 

ADB supplement, however, maintained growth forecasts for the region’s second biggest economy at 7.4 percent for FY17 and 7.6 percent for FY18.

The bank cut inflation forecasts for South Asia to 4.2 percent from 5.2 percent in 2017 and to 4.7 percent from 5.4 percent in 2018, prompted by lower increases in Bangladesh, Bhutan, India and Nepal. 

“Bangladesh is experiencing a steady decline in nonfood inflation, reflecting favorable international prices,” it said. “In India, inflation remained subdued for a second year in FY2016, averaging 4.5 percent. Prices have remained surprisingly soft since April 2017 as food inflation was sharply curtailed by augmented domestic supply, higher imports, and lower global prices.”

ADB further said fuel inflation has also remained benign, reflecting the softening of global crude oil prices. Lower gold prices and discounts offered by retailers to clear inventory ahead of the implementation of the Goods and Services Tax contributed to a drop in core inflation in the first quarter of FY2017. 

Inflation in India is now expected to average 4 percent in FY2017, well below the forecast of 5.2 percent in ADO 2017, before rising to 4.6 percent in FY2018.