ADB explains why recovery is still constrained

ISLAMABAD: Pakistan’s overall recovery is still constrained by moderate confidence and high inflation eroding purchasing power, said the Asian Development Bank (ADB).

The bank in its latest report, “Asian Development Outlook (ADO)”, stated that Pakistan’s inflation rate averaged 28.5 percent over July–October, but is expected to ease amid fiscal consolidation and monetary tightening, as well as the improved availability of food and key imported inputs.

The bank has raised its economic forecast for developing economies in Asia and the Pacific, after robust domestic demand drove higher-than-expected growth in the People’s Republic of China (PRC) and India.

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The regional economy is expected to grow 4.9 per cent this year, compared with a previous forecast of 4.7 per cent in September, according to the ADO.

The outlook for next year is maintained at 4.8 per cent.

The PRC’s economy is projected to expand by 5.2 per cent this year, compared with a previous forecast of 4.9 per cent, after household consumption and public investment boosted growth in the third quarter.

The growth outlook for India has been raised to 6.7 per cent from 6.3 per cent following faster-than-expected expansion in July-September, driven by double-digit growth in industry. The upgrades for the PRC and India more than offset a lowering of the forecast for Southeast Asia, caused by lacklustre performance in the manufacturing sector.

“Developing Asia continues to grow at a robust pace, despite a challenging global environment,” said ADB Chief Economist Albert Park. “Inflation in the region is also gradually coming under control.

Still, risks remain, from elevated global interest rates to climate events such as El Niño. Governments in Asia and the Pacific need to remain vigilant to ensure that their economies are resilient, and that growth is sustainable.“

The region’s inflation outlook for this year has been lowered to 3.5 per cent from an earlier projection of 3.6 per cent, according to ADO December 2023. For next year, inflation is expected to edge up to 3.6 per cent, compared with a previous forecast of 3.5 per cent.

Copyright Business Recorder, 2023