ISLAMABAD: Pakistan’s economic outlook for the fiscal year 2023 (ending June 30, 2023) has deteriorated following heavy flooding, as the economy was already struggling to regain macroeconomic and fiscal stability, says the Asian Development Bank (ADB).
The bank in its report, “Asian Development Outlook (ADO), global gloom dims Asian prospects”, noted that flood disruption and damage are expected to slow real GDP growth in combination with a tight monetary stance, high inflation, and an un-conducive global environment.
Pakistan’s economy was already struggling to regain macroeconomic and fiscal stability before the floods, which adversely affected cotton, rice, and other important crops. As wheat is usually planted from mid-October, flood damage threatens the upcoming agricultural season as well.
Further, the flooding is expected to have spillover effects on the industry, notably textiles and food processing, and on services, in particular wholesale trade and transportation.
The report noted that South Asia is on track to meet the update growth forecast of 6.5 percent in 2022, but the forecast for 2023 is downgraded slightly from 6.5 percent to 6.3 percent. The sub-regional revision for 2023 largely reflects lower forecasts for Bangladesh and Pakistan.
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In Bangladesh, recovery is hampered by external imbalances and unexpectedly high inflation. In Pakistan, floods that began in mid-June have dampened economic activity already affected by stabilization efforts to tackle sizable fiscal and external imbalances and double-digit inflation.
The inflation projection for South Asia is increased marginally for 2022 from 8.1 percent to 8.2 percent and more substantially for 2023 from 7.4 percent to 7.9 percent. The sub-regional revision for 2023 largely reflects higher inflation forecasts for Bangladesh, Nepal, Pakistan, and Sri Lanka. Inflation forecasts for elsewhere in the sub-region in 2023 remain unchanged. Inflation in India is still expected to rise to 6.7 percent in the fiscal year 2022 before falling back to 5.8 percent, it added.
The fiscal year 2023 forecast for Pakistan is revised up to reflect a weaker currency, higher domestic energy prices, and flood-related crop and livestock losses and supply disruption, which have caused transitory food shortages and price spikes.
Transportation difficulties have exacerbated these shortages and disrupted other domestic supply chains, broadening inflationary pressures and imposing production challenges.
Copyright Business Recorder, 2022