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Global lender’s report notes ‘surprising’ improvement to Pakistan’s economy due to remittance inflows, domestic demand and targeted lockdowns
Forecasting Pakistan’s economy to grow by 3.4% in the current fiscal year (2021-22), the World Bank on Wednesday issued a report that noted ‘surprising’ improvement to the country’s growth due to increased remittance inflows, domestic demand and targeted lockdowns.
“Growth in Pakistan surprised on the upside, supported by improving domestic demand, record-high remittance inflows, and a narrow targeting of lockdowns,” read the Global Economic Prospects 2022 report, which stressed that both advanced and developing economies were likely to experience slowed growth in the coming fiscal after showing strong recovery in the previous year.
According to the report, high inflation in Pakistan led to the removal of monetary accommodation, a contrast to its regional neighbors, where the global lender said it expected monetary policy to tighten but continue to be moderately accommodative in 2022. It noted that South Asia’s growth prospects had improved since June 2021, largely because of better prospects in Pakistan, Bangladesh and India.
“Pakistan will benefit from structural reforms boosting export competitiveness and enhancing the financial viability of the power sector,” it said, forecasting Islamabad’s growth rate to hit 4 percent in the next fiscal year.
Per the report, growth in the South Asian region was estimated to accelerate to 7.6 percent in 2022 before slowing to 6 percent in 2023. It estimated India’s economic growth to hit 8.3 percent in the current fiscal, and 8.7 percent in 2022-23, adding that it expected India’s growth to overall be stronger than its immediate neighbors due to a low base effect.
The World Bank predicted Bangladesh’s growth to reach 6.4 in 2021-22, and grow to 6.9 percent in 2022-23.
Globally, said the lender, growth would reduce to 4.1 percent in the current fiscal against as estimated 5.5 percent in 2021. It warned that economic disruptions caused by the Omicron variant of the coronavirus pandemic currently sweeping across the globe “could substantially reduce growth” to around 3.4 percent.
On Afghanistan, the World Bank said that since the Taliban took control of Kabul in August, all international support had been cut off and its overseas assets frozen, which had resulted in an economic crisis. “Prices for basic household goods, including food, are rising rapidly, while private sector activity has collapsed,” it said. “The humanitarian response is being curtailed by the collapse of the banking sector and an inability to transfer funds internationally,” it added.