ISLAMABAD: Pakistan’s economic growth is expected to rebound this year before gaining pace in 2022 as business activity gradually resumes after the coronavirus pandemic, the Asian Development Bank (ADB) said in a report.
According to the Asian Development Outlook (ADO) 2021, ADB’s annual flagship economic publication, Pakistan’s economy will grow by 2% in 2021 as COVID-19 restrictions ease. It added that assuming the COVID-19 vaccine rollout is successful and economic stabilization measures are implemented, growth is expected to accelerate to 4% in 2022 with improved consumption and investor confidence.
“It is vital for Pakistan to continue to combat the pandemic by rapidly deploying vaccines and continuing with reforms to support economic recovery, including strengthening social protection and supporting the private sector,” said ADB Acting Country Director for Pakistan F. Cleo Kawawaki.
“Improving access to finance for small and medium-sized enterprises is essential to unlocking business opportunities and stimulating new jobs,” he added. It said the continued macro-economic stability and increasing competitiveness are also key pillars under ADB’s Pakistan Country Partnership Strategy 2021–2025 that will support an inclusive and sustainable recovery.
The report added that for current fiscal year 2021, the industry appears poised for robust growth led by manufacturing and construction. It noted that services are expected to rebound as retail and trade picks up. However, agriculture is projected to see slower growth mainly due to a sharply lower cotton harvest following heavy rains, pest attacks, and continued contractions in cultivated areas of land.
According to the report, inflation is projected to come down to 8.7% in FY2021, partly reflecting an expected improvement in food supply, subsidies for wheat and sugar, and closer price monitoring of essential commodities.
The State Bank of Pakistan maintained its policy rate at 7% to support the economic recovery. The investment is expected to strengthen as global sentiment improves and the stabilization program supported by the International Monetary Fund (IMF) progresses.
The report noted that strong support for small and medium-sized enterprises (SMEs) is needed to stimulate growth and ensure jobs for young people entering the labor market.
It advised that licensing and registration processes need to be simplified to facilitate the movement of informal SMEs into the formal sector, adding that digitalization could also expand their access to financial services and export markets.
