The economic growth in Pakistan is projected to accelerate from 4.5% in 2016 to 4.8% in 2017, says a Wold Bank report.
The growth would be supported by growing industry and services and greater investment as well as buoyed by low oil prices and substantial remittances.
According to WB South Asia Economic Focus, 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.
Discussing the economic outlook of South Asia in general, the report says the region 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.
The region’s economic performance prospects remain strong due to its limited exposure to global turbulence, coupled with increasing investment activity.
However, there are also signs of fading tailwinds, the report added. Capital flows to the region have declined and remittances from oil exporting countries have started to weaken while 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.
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.
“South Asia has been resilient to global turbulence due to its limited exposure to slowdowns in other major economies coupled with the tailwinds of favorable oil prices, capital flows, and remittances,” said Annette Dixon, World Bank South Asia Vice President.
“However, fiscal and financial vulnerabilities remain and countries should strive to address them through generating revenue and creating more fiscal space.”
The report’s analysis of fiscal policy across the region suggests that governments need to find a balanced path towards fiscal consolidation.
“Fiscal policy has a wide range of impacts for development.
The fiscal deficit affects macroeconomic stability, capital expenditures are needed for growth, and taxes and social spending matter for equity,” said World Bank South Asia Chief Economist Martin Rama. “With the currently low oil prices, this is also an opportune time for South Asia policy makers to introduce or expand explicit carbon taxes. This would improve environmental and fiscal sustainability at the same time.”