ADB maintains Pakistan growth forecast at 4pc for FY22

ISLAMABAD: The Asian Development Bank on Wednesday maintained its previous 4 percent growth outlook for the Pakistan's economy this fiscal year as vaccine rollouts allow businesses to gradually resume operations in the second year of the coronavirus disease pandemic.

"The country's economy is expected to continue recovering in FY2022, supported by stronger private investment, improving business activity, a steady vaccine rollout, and economic stimulus measures for FY2022," said ADB in its annual flagship economic publication, Asian Development Outlook (ADO) 2021 Update. "Yet, significant uncertainty clouds the economic outlook over the course of the pandemic in Pakistan and worldwide."

ADB said developing Asia's economic rebound this year could be dented by the rapid spread of the Delta coronavirus variant and as it urged economies to adapt to a 'new normal' after Covid-19 to underpin recovery.

Growth in developing Asia, which groups 46 countries in the Asia-Pacific, is projected to reach 7.1 percent this year, down from its 7.2 percent forecast in July and 7.3 percent in April.

While seeing a slight downgrade, this year's growth estimate is a turnaround from the region's 0.1 percent contraction last year. For 2022, the ADB kept its 5.4 percent growth forecast for developing Asia.

Yong Ye, bank's Country Director said Pakistan’s economy is on the path to recovery, supported by promising growth in the industry and services sectors

“The continued rollout of the Covid-19 vaccination program, structural reforms, and the expansion of social protection programs are all key to ensuring inclusive and sustainable growth," Ye said.

"Fiscal incentives and policies to boost export competitiveness, bolster the performance of the manufacturing sector, and augment private investment will continue to play an instrumental role in strengthening the economic outlook.”

Pakistan’s economic growth of 3.9 percent in FY2021 was supported by improved Covid-19 containment strategies through the second and third waves of infections and continued accommodative fiscal and monetary policies that accelerated the recovery across all sectors.

Growth in industry, predominantly construction and small-scale manufacturing, and services are forecast to improve in FY2022. Agriculture is also expected to continue supporting GDP growth.

Inflation declined to 8.9 percent in FY2021. Food price inflation remained high due to supply chain disruptions, increased prices for wheat and sugarcane, and an extended wet monsoon. Rising international oil prices boosted energy price inflation.

Yet, inflation for other goods eased thanks to the appreciation of the Pakistani rupee and a postponement of planned hikes for electricity tariffs and domestic fuel prices.

The State Bank of Pakistan (SBP), till this week, maintained its policy rate at 7 percent to support the economic recovery.

Investment is expected to strengthen as global sentiment improves and the International Monetary Fund-supported stabilization program continues to progress.