The Asian Development Bank (ADB) has said that Pakistan’s economy will rebound in the current fiscal year to post 2.4 per cent GDP growth given that the Covid-19 pandemic is contained and the authorities continue with the International Monetary Fund (IMF) led reforms.
Pakistan is projected to experience a broad economic recovery in FY2021 (which ends June 30, 2021) as the economic sentiment improves with the expected subsiding of the coronavirus pandemic and the resumption of structural reforms, said an ADB report.
The ADB development outlook update released today revised the 2020 growth forecast for Pakistan to negative 0.4pc and the growth forecast for 2021 to 2.0pc.
In April, the ADB had forecast Pakistan to grow 2pc this year and 3.2pc next year. Covid-19 severely impacted economic activity in 2020, erasing gains achieved in the first half of the fiscal year. The suspension of travel and the closure of nonessential businesses induced concurrent demand and supply shocks.
Rising food prices pushed inflation from 6.8pc in FY2019 to 10.7pc in FY2020, however inflation is projected to slow to 7.5pc in FY2021. The current account deficit eased considerably as merchandise imports fell steeply due to containment disruptions, lower oil prices, and local currency depreciation.
As inflationary pressures eased, the State Bank of Pakistan cut its policy rate by a cumulative 625 basis points from March to June 2020 to 7.0pc and introduced additional measures to support the economic recovery.
“Pakistan has achieved notable success in containing the dual health and economic challenge presented by COVID-19,” said ADB Country Director for Pakistan Xiaohong Yang. “As the curve flattens and business activity resumes, the economy is showing signs of resilience and recovery.”