KARACHI: World Bank has made a forecast that Pakistan will achieve GDP growth rate of 4.5% at factor cost and 5.5% at market prices in the current financial year 2016-17, however the country is left by India and Bangladesh with projected GDP growth rate of 7.8% and 6.7%.
In a report, “Global Economics Prospects: Spillovers Amid Weak Growth”, World Bank pointed out macroeconomic adjustment under an International Monetary Fund programme, security initiatives in Karachi, the country’s commercial hub, and major infrastructure project agreements with China have boosted investor confidence.
“Pakistan appears poised to grow at a 5.5% rate in the fiscal year that ends in June, up from 4.7% in the previous fiscal year,” it said.
Pakistan is projected to continue to grow steadily at 5.5% in FY16-17, which begins July 1. When calculated at factor cost, growth in Pakistan should rise to 4.5% from 4.2% in the current fiscal year, supported by investments from China as part of the China-Pakistan Economic Corridor development, and positive spillovers from low oil prices and from the lifting of international sanctions against neighbouring Iran.
India is well positioned to withstand near-term headwinds and volatility in global financial markets due to its reduced external vulnerabilities, a strengthening domestic business cycle, and a supportive policy environment. The economy is projected to grow at a faster 7.8% in FY17, which begins April 1, helped in part by progress on infrastructure building and government measures aimed at boosting investment.
India accounts for 90% of investment inflows into the region and should remain attractive to investors in comparison to other major emerging market economies, where economic growth is moderating or shrinking. In Bangladesh, growth is projected to accelerate to 6.7% in 2016 from 6.5% in 2015 as a result of increases in infrastructure spending and public sector wage hikes, as well as laws strengthening worker rights that are expected to support exports as the country seeks to maintain US trade preferences. Nepal is projected to expand by 1.7% in 2016 after growing by 3.4% in the previous year, slowed by the devastation and loss of life from the April earthquake.
In Nepal, however, the cost of earthquakes in the spring of 2015 is estimated at about one-third of that nation’s GDP, and reconstruction efforts have been held back by political uncertainty and the closure of land routes through India in the second half of 2015.
Political standoffs in India could stall reforms. A failure to pass the goods and services tax and land reforms could constrain spending on infrastructure and impede a stronger recovery in private investment. Most countries across the region need to contend with high levels of non-performing loans in banking systems. Fiscal risks also remain elevated in most countries. A resumption of political tensions in Bangladesh and an escalation of existing tensions in Nepal and Afghanistan are key risks in these countries. Although less pressing than domestic risks, external risks remain. Economic activity in the region could hurt if there is a disorderly slowdown in major emerging market economies or if tighter global financial conditions produce financial market stress.
The South Asia region is projected to be a bright spot in an otherwise gloomy outlook for emerging and developing economies, with growth accelerating to 7.3% in 2016. This pickup is expected to be driven by strengthening investment and government and central bank policies that support economic growth.