Due to climate headwinds, Pakistan’s economy is forecasted to slow down to 3.5% in Financial Year 23, according to the ADB.
According to the Asian Development Bank, while Pakistan’s economic growth reached around six percent in FY22, it is anticipated to slow down in the current fiscal year to 3.5 percent due to double digit inflation, climate headwinds and policy efforts.
The Asian Development Bank revised Pakistan’s growth estimates from 4.5% to 3.5% after devastating floods, policy tightening, and critical efforts to tackle sizable fiscal and external imbalances.
According to the government report, higher private consumption and an expansion in agriculture, services and industry, particularly large-scale manufacturing, drove growth in FY22.
The recent floods that damaged much of Pakistan’s economy have added ‘profound risk’, country director Yong Ye said.
In flood-affected areas, ADB hopes that reconstruction and economic reforms will catalyze significant international financial support, stimulate growth, and preserve social and developmental spending to protect the vulnerable, he said. Furthermore, ADB is preparing a package of relief, rehabilitation, and reconstruction to support people, livelihoods, and infrastructure immediately and in the long-term.
The lender said in a news release that the economic outlook for Pakistan would be largely determined by the restoration of political stability and the continued implementation of IMF reforms.
Household incomes increased 10% in FY 2022 as a result of increased private consumption and strong performances in crops and livestock. Agriculture output increased 4.4% in that year.
According to the release, agricultural growth is expected to slow next year due to flood damage and high input costs, which may reduce services growth, particularly wholesale and retail trade.
The ADB report said that the reduction in industry output due to capacity and input constraints, as well as the contraction in domestic demand, would reduce economic activity in FY23, when fiscal adjustments and monetary tightening would occur.
Despite a forecast rise to 18pc in FY23, inflationary pressures would remain high, the report said.
Although the recent floods are the most significant downside risk to the outlook, elevated inflation and the possibility of fiscal slippages as general elections approach, as well as higher-than-projected global food and energy prices, remain as well.
