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| ADB. Source : Online |
According to a report released on Wednesday by the Asian Development Bank (ADB), disastrous floods, tighter policy, and urgent attempts to address significant fiscal and external imbalances will cause Pakistan's economy to contract to 3.5 percent in fiscal year 2023. Even though it is anticipated that growth will have reached 6.0% in FY2022, the downturn has been predicted. The growth of Pakistan's Gross Domestic Product (GDP) in FY2022 was attributed to increasing private consumption as well as increases in agriculture, services, and industry, notably large-scale manufacturing, according to the Asian Development Outlook (ADO) 2022 Update. However, the ADB's reduced growth prediction for FY2023, in addition to the effects of the climate and Pakistan's crucial policy initiatives, also takes into account double-digit inflation. The most recent report is an update to ADB's premier economic publication of the year.The ADB Country Director for Pakistan, Yong Ye, stated that "the recent catastrophic floods in Pakistan add substantial risk to the country's economic outlook." "We anticipate that flood-related reconstruction and economic reforms would spur major financial aid from outside, boost economic expansion, and maintain social and development spending to safeguard the weak.
ADB is putting together a package of assistance, restoration, and construction to help people, livelihoods, and infrastructure both now and in the future, according to Yong Ye.
The return of political stability and the ongoing implementation of measures under the resurrected International Monetary Fund programme to stabilise the economy and restore fiscal and external buffers will significantly influence the economic picture. The update claims that in FY2022, private consumption increased by 10%, which led to better employment circumstances and higher household incomes.
In FY2022, the output of agriculture increased by 4.4% thanks to successful crop and livestock seasons. Due to flood damage and high input costs, agriculture growth is predicted to decline the next year, which may restrain the growth of services, notably wholesale and retail commerce. Fiscal changes and monetary tightening are anticipated to reduce domestic demand in FY2023. Industry output will be decreased due to a decrease in demand, capacity limitations, and increased input costs brought on by the depreciation of the rupee.
The withdrawal of gasoline and energy subsidies, a major depreciation of the rupee, and the strong increase in global commodity prices all contributed to a sharp acceleration of inflation in the fourth quarter (April-June) of FY2022. The highest monthly inflation rate since 2008 was 21.3% in June, pushing average headline inflation up to 12.2% in FY2022. With inflation expected to reach 18% in FY2023, inflationary pressures will likely continue high. In addition to the floods, the research notes that there are still downside risks to the outlook, including the increased inflation rate, potential fiscal slippages as general elections draw near, and a higher-than-anticipated rise in world food and energy costs.
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