ADB maintains growth forecast at 5.5 percent in FY18

KARACHI: Asian Development Bank (ADB) on Wednesday maintained its growth forecast for Pakistan’s economy at 5.5 percent for the current fiscal year of 2017/18.

ADB, in a supplement to its Asian Development Outlook (ADO) Update 2017 report, said growth projection for Pakistan is as in the update, which was 5.5 percent. Manila-based lender, in its ADO update in September, said the acceleration in GDP stemmed from growth in services and industry driven by infrastructure investment and development expenditure. “Agriculture should expand by trend rates.”

Recovery in agriculture and stronger manufacturing led to a 5.3 percent growth in the last fiscal year of 2016/17. ADB, in the supplement, forecasts that economic expansion in developing Asia will accelerate to six percent in 2017 “as stronger than expected exports and domestic consumption fuel growth”.

“Excluding Asia’s newly industrialised economies, growth is now expected at 6.5 percent this year,” it said. ADB upgraded its 2017 GDP outlook in the region by 0.1 percentage points compared to its September 2017 forecast, while its 2018 forecast remains unchanged at 5.8 percent. An unexpectedly strong expansion in Central, East, and Southeast Asia has offset a downward adjustment in South Asia.

“Developing Asia’s growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development,” Yasuyuki Sawada, ADB’s chief economist said in a statement. “Countries can further take advantage of the global recovery by investing in human capital and physical infrastructure that will help sustain growth over the long-term.”

Combined growth for the major industrial economies was revised upward to 2.2 percent for 2017 and 2 percent for 2018, due to robust domestic demand in the euro area, and in Japan due to private investment and net exports. Growth projections for the United States remain unchanged at 2.2 percent in 2017 and 2.4 percent in 2018.

“South Asia will remain the fastest growing of all sub-regions in Asia and the Pacific, despite a downward revision from previous projections from 6.7 percent to 6.5 percent in 2017, and is expected to pick up to 7 percent in 2018,” ADB said. GDP growth in India—the subregion’s largest economy—was revised down to 6.7 percent in 2017 and 7.3 percent in 2018.

Meanwhile, rising commodity prices have not yet driven inflation across the region, with consumer price inflation tame and stable. Price inflation is unchanged from previous projections of 2.4 percent in 2017 and 2.9 percent in 2018.

ADB said rising domestic demand fueled by economic expansion is expected to stoke inflation in FY2018. “However, the ADO 2017 projection for 4.8 percent inflation could stand with continued central bank policy vigilance, a muted increase in global oil prices, and some expected easing of global food prices.”