ISLAMABAD: Pakistan's economy is showing signs of recovery underpinned by falling global oil prices and the expected uptick in regional economic growth.
A report of Asian Development Bank (ADB) "the Asian Development Outlook (ADO) 2015, ADB's flagship annual economic publication here Tuesday forecasts that Pakistan's economic growth in 2015 would modestly improve to 4.2 percent and to 4.5 percent in 2016, subject to steady progress in macroeconomic and structural reforms, and stable security, political, and weather conditions.
In 2014, the country exuded renewed confidence with higher foreign exchange reserves, lower fiscal deficit and moderate inflation. However, gross domestic product (GDP) growth is still below the rate required to absorb a growing labor force, the report added.
Unveiling the report here, the country director for ADB in Pakistan, Werner Liepach said the Pakistan's economy is expected to continue push forward with a modest growth trajectory.
He said Pakistan needs to attract investments to create jobs, reduce poverty and boost economic growth, which to a great extent depends on continued stability, a better investment climate and enabling policy reforms.
"Ongoing efforts to make the power sector financially viable and reforms of public sector enterprises through restructuring and privatization are vital for macroeconomic gains", he remarked.
Werner Liepach said energy and security challenges continue to weigh on Pakistan's business climate.
A key risk to the fiscal performance stems from the rebuilding of circular debt, high security spending, and low revenue collection, he added.
Attracting higher private investment also requires policy measures to boost the export competitiveness of Pakistani manufacturers, accelerate financial sector development, increase public sector investment in infrastructure, and a competitive exchange rate.
He said boosting manufacturing is a key policy challenge highlighted in the ADO.
"Pakistan's economic transformation has largely bypassed deepening and diversification of manufacturing as it evolved from agriculture to largely low productivity services. Enhancing industrial competitiveness will require the country to address policy distortions, lower trade barriers, create a business-friendly environment with a stable microeconomic framework, and improve infrastructure, access to finance, and human development, the report says.
Pakistan is implementing an economic reform programme underpinned by a $6.7 billion Extended Fund Facility arrangement with the International Monetary Fund, which recently completed its 6th review for release of the 7th tranche.
"The robust implementation of the reform program helped entice investors' interest and has facilitated restoration of program lending from multilateral donors including the ADB. Pakistan can use fair winds to stay on course and continue to improve its overall macroeconomic performance", Liepach concluded.
Similarly regarding overall Asian growth, the report forecasts tha the developing Asia will achieve gross domestic product (GDP) growth of 6.3 percent in both 2015 and 2016. The region also grew by 6.3 percent in 2014.
"Developing Asia is making a strong contribution to global economic growth. Falling commodity prices are creating space for policy makers across the region to cut costly fuel subsidies or initiate other structural reforms.
This is a key opportunity to build frameworks that will support more inclusive and sustainable growth in the longer term", the report added.
Replying to a question, Mr Werner said the ADB was currently financing projects in three sectors of Pakistan worth of over $1.2 billion that is energy projects, improving energy distribution system projects and projects for flood affected people in the country.
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