Business

Pakistan’s growth decelerates to 4.5% in 2016: WB report

April 10, 2016

205

In Pakistan, growth decelerated to 4.5 percent in 2016, down from 5.5 percent in 2015. However, 2017 may see a gradual pick up supported by the growing industry and services and greater investment as well as buoyed by low oil prices and substantial remittances. Sustained and inclusive growth with further acceleration will require tackling pervasive power cuts, a cumbersome business environment, and low access to finance through the successful implementation of tax and energy reforms, says a World Bank report issued from Washington on Sunday.

Led by robust growth in India, South Asia shows resilience in the face of turbulent international markets and remains the fastest-growing region in the world, with economic growth forecast to gradually accelerate from 7.1 per cent in 2016 to 7.3 per cent in 2017,

According to the twice-a-year South Asia Economic Focus, the region’s economic performance prospects remain strong due limited exposure to global turbulence, coupled with increasing investment activity. However, there are also signs of fading tailwinds. Capital flows to the region have declined and remittances from oil exporting countries have started to weaken. Fuel and food prices remain low but are unlikely to keep falling. As a result overall output growth is slower than previously anticipated and inflation has recently been creeping up.

Given its weight in the region, India sets the pace for South Asia as a whole. Economic activity is expected to accelerate from 7.5 per cent in FY2016 to 7.7 per cent in FY2017 based on the expectation of strong private investment, a push in infrastructure spending, an improved investment climate, and deleveraged corporate and financial balance sheets.

In India, GDP growth is expected to be 7.5 per cent in 2016, gradually inching up from 7.4 per cent in 2015 and supported by a rebound in agriculture and stimulus from civil service pay reforms. However, delays in the adoption and implementation of key reforms could affect investor sentiment. Favourable overall trends mask important underlying divergences: between urban and agricultural households; between domestic and external demand; and between public and private capital expenditure, which should be addressed.

In Maldives, GDP growth is expected to be modest at 3.5 per cent in 2016, and 3.9 per cent in 2017. Forecasts have been dragged down by a slowdown in tourism arrivals, especially from China and Russia. Fiscal consolidation and more sequencing of the investment projects is needed to contain the level of public debt. Youth unemployment with skill mismatch and lack of local economic opportunities are concerning.

After the 2015 earthquakes, Nepal experienced a second major shock with cross-border trade disruptions. This reduced the economic activity and lowered growth prospects to 1.7 per cent in 2016 compared to 3.4 per cent in 2015. Disruptions increased inflation to double digits, affecting the welfare of the poor and the vulnerable, while reducing revenue collection and slowing reconstruction efforts. Normalisation is expected by the end of 2016 and GDP growth may pick up to above 5 per cent in 2017, helped by a reconstruction boom.

Sri Lanka’s economic growth is expected to accelerate from 4.8 per cent in 2015 to 5.3 per cent in 2016, driven by increased public investment and postponed investments. However, the challenging global environment has taken a toll on the economy with reduced exports and remittances; and significant capital outflows, leaving Sri Lanka with higher public debt, lower reserves and rising inflation. Immediate challenges include managing the external and fiscal balances.

Bangladesh will see growth sustained at levels above 6 per cent. Most economic indicators are stable and growth is projected to reach 6.3 per cent in 2016, setting the stage for a rise in 2017 due to increased government consumption and investment, a recovery in private investments, as well an easing of regulatory and infrastructure constraints. However, the country should be cautious about risks emanating from the political, trade and financial sphere.

Economic activity in Bhutan is expected to gain momentum with Gross Domestic Product (GDP) expected to grow at 6.7 per cent in 2016 compared to 5.8 per cent in 2015. This solid performance is driven by new hydropower investments, government consumption, and spending. Bhutan runs a large current account deficit of which half is related to hydropower. Private sector development and asset diversification are keys to reducing vulnerability to donor finance and addressing rising youth unemployment.