The Asian Development Bank In its flagship economic publication titled “Asian Development Outlook (ADO) 2019,” the bank said Pakistan’s GDP growth is forecast to drop to 3.9% in FY2019.
“For FY2018, ended 30 June 2018, the estimated GDP growth rate [was] revised downward from earlier 5.8% to 5.2%. Growth therefore slowed from 5.4% a year earlier. The growth decelerated despite revived agriculture. The expansionary fiscal policy markedly widened the budget and current account deficits and drained foreign exchange,” the report observed.
“Until macroeconomic imbalances are alleviated, the outlook is for slower growth, higher inflation, pressure on the currency, and heavy external financing needed to maintain even a minimal cushion of foreign exchange reserves. Recurrent crises in the balance of payments require that firms become more export competitive,” it added.
Inflation will remain elevated at 7.0% in FY2020, it added.
“The current account deficit is expected to ease in FY2019 but will remain high at the equivalent of 5.0% of GDP because of the large trade deficit. It will narrow further to 3.0% in FY2020 with easing macroeconomic pressures on the external accounts. “Foreign exchange reserves, under pressure, declined by $6.3 billion to $9.9 billion at the end of FY2018, sufficient to finance less than 2 months of imports of goods and services. These external pressures caused the Pakistan rupee to depreciate by 11.7% against the US dollar from December 2017 to the end of June 2018, when the exchange rate was PRs121 per $1,” the report continued.
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