Pakistan’s economy expected to contract 0.2% in FY21: World Bank

KARACHI: The economy of Pakistan is expected to contract 2.6 percent in the fiscal year 2019-20 and 0.2 percent during 2020-21, according to a new World Bank report.

According to the Global Economic Prospects report, GDP in South Asia is projected to contract by 2.7 percent in 2020.  India’s growth is estimated to have slowed to 4.2 percent in the fiscal year 2019-20 and is predicted to contract by 3.2 percent in the fiscal year 2020-21.

Bangladesh’s figures for the same period stood at 1.6 percent and 1 percent, respectively. “Business confidence in both manufacturing and services sectors have concomitantly fallen in economies like Pakistan,” the report noted.

The sales and production in the automobile sector in Pakistan had been hit especially hard.  In addition, labor-intensive export sectors like textiles are expected to contract sharply and subsequently recover slowly.

However, there was one bright spot for Pakistan: a drop in oil prices. “The sharp decline in oil prices in 2020 could provide some support to the region, given sizable oil imports in India and Pakistan, and help cushion fiscal and current account balances,” the report noted.

However, that would have to be balanced with the expected drop in remittance inflows, which are expected to decline by about one-fifth in South Asia this year.

Overall, the report is not concerned about Pakistan’s, or South Asia’s, ability to handle the pandemic’s adverse effects. The report noted that the pandemic will trigger a long-lasting rise in poverty.