Pakistan’s economic growth to slow down to 3.5% in fiscal year (FY) 2023 in the wake of devastating floods, double-digit inflation, sizable fiscal and external imbalances, the Asian Development Bank (ADB) estimated in a report on Wednesday.
The ADB stated in its Asian Development Outlook (ADO) 2022 Update that the increase in private consumption and expansion in large-scale manufacturing were the main drivers of Pakistan’s GDP growth in FY2022.
ADB’s reduced growth prediction also includes double-digit inflation—along with climate challenges and Pakistan’s crucial policy actions, it stated.
ADB Country Director for Pakistan Yong Ye said the recent floods that caused widespread damage had added “profound risk to the country’s economic outlook”.
“We hope flood-related reconstruction and economic reforms will catalyze significant international financial support, stimulate growth, and preserve social and development spending to protect the vulnerable.” he added.
The lender stated in a news release that the restoration of political stability and continuing implementation of reforms in line with the International Monetary Fund (IMF) program will have a significant impact on Pakistan’s economic prospects.
“In FY2022, private consumption increased by 10%, improving employment conditions and raising household incomes. Agriculture’s output increased by 4.4 percent in FY2022 thanks to successful crop and livestock seasons.
According to the report, “agriculture growth is likely to decline next year due to flood damage and high input costs, which may diminish growth in services, notably wholesale and retail commerce.”
According to the ADB assessment, capacity and input restrictions brought on by the depreciation of the rupee would cause industry output to decline in FY23 combined with fiscal and monetary tightening that was anticipated to cause a reduction in domestic demand.
According to the projection, which increased to 18%, inflationary pressures would continue to be significant in FY23.
It further stated that along with floods, the elevated inflation rate, possible fiscal slippages, and a higher-than-projected increase in global food and energy prices, remained downside risks to the outlook.
