- WB stated that Pakistan's growth is projected to be held back by continued fiscal consolidation pressures and services sector weakness.
The recovery in Pakistan's economy is expected to be subdued, averaging 1.3 percent over the next two fiscal years, said the World Bank, which is slightly better than expected in June 2020 but below potential growth.
The World Bank semi-annual report titled “Global Economic Prospects (GEP) 2021” stated that Pakistan’s economic growth rate for the current fiscal year is forecast to remain at 0.5 percent, which is expected to improve to 2 percent in 2022.
WB stated that Pakistan's growth is projected to be held back by continued fiscal consolidation pressures and services sector weakness.
“The outlook is predicated on maintaining reform momentum and adherence to a macroeconomic-sustainably framework. Limited prospects for a strong rebound in the services sector will aggravate poverty. This sector represents about half of Pakistan’s output and are an important source of income for low-income households,” the World Bank.
The report stated that remittance inflows remained robust in 2020 with double-digit growth in Bangladesh and Pakistan due to the increased use of formal channels to repatriate funds, government incentives, and the return of migrant workers. “These inflows have contributed to the improvement of current accounts, and in some cases with international assistance, allowed several major regional economies to increase their foreign reserves (Bangladesh, India, Pakistan),” it said.
The World Bank projected the South Asian region to grow by 3.3 percent in 2021 and 3.8 percent in 2022, substantially weaker rates than during the decade leading up to the pandemic.
“Weak growth prospects reflect a protracted recovery in incomes and employment, especially in the services sector; limited credit provisioning, constrained by financial sector vulnerabilities; and muted fiscal policy support,” the report said.
The WB forecasted South Asia output in 2022 to remain about 16 percent below pre-pandemic levels, the biggest loss among EMDE regions.
“The baseline forecast assumes that vaccines will be distributed on a large scale in the region in the second half of 2021 and that there is no widescale and significant resurgence in infections,” it said.
Talking about neighboring India, the WB expects India growth to recover to 5.4 percent in 2021, as the rebound from a low base is offset by muted private investment growth given financial sector weaknesses.