Aided by fiscal consolidation, low inflation and favorable oil prices, Pakistan is on path to achieving a 4.6 per cent GDP growth in 2016, says the World Bank in a report on South Asia.
According to the twice-a-year South Asia Economic Focus report, partly helped by cheap oil prices, economic growth in South Asia is expected to accelerate. In Pakistan, further progress depends on tackling frequent power cuts, and improvement in business environment and tax revenues.
South Asia is among the greatest global beneficiaries from cheap oil, as all countries in it are net oil importers. In the last quarter of 2014 South Asia was already the fastest-growing region in the world, the report said.
The regional growth is projected to steadily increase from 7 per cent in 2015 to 7.6 per cent by 2017 through maintaining strong consumption and increasing investment investor sentiment.
The decline in oil prices has been reflected in the domestic prices of oil products to different extents across the region. The pass-through exceeded 50 per cent for most oil products in Pakistan, but was nil in Bangladesh.
Together with favorable food prices, cheaper oil has contributed to a rapid deceleration of inflation. South Asia went from having the highest inflation rate among developing regions to having the lowest in barely one year. In March 2013, the Consumer Price Index (CPI) of the region had increased by 7.3 per cent year-on-year, compared to 1.4 per cent in March 2015.
External vulnerabilities have receded, the report shows. Current account balances are strong in most countries. Capital inflows to India have increased from 1.9 to 3.4 per cent of GDP, although more volatile portfolio investments account now for a greater share of the total. International reserve buffers have been built across the region, including in Pakistan.
