Pakistan economy to 'recover slightly' from 2021 but reforms critical for growth: UN reportArchive
Pakistan's economy is expected to recover slightly from 2021 onward as increased government revenues from a tax hike allow expanded public investment and as other government reforms required by the International Monetary Fund (IMF) begin to bear fruit, says the latest United Nations report on the state of the world economy.
The ‘World Economic Situation and Prospects 2020’ report emphasised that “continued commitment to reform, combined with productive investment in infrastructure and strategic capacity development, will be critical for the country to find its way back to its previous growth path.”
Pakistan has been struggling with a balance-of-payments crisis and the burden of high public debt, which have led to an arrangement with the IMF and corresponding fiscal tightening. High inflation and security concerns have hurt domestic demand and private investment, and the government’s ability to address the slowdown has been severely curtailed by the fiscal tightening, said the report launched on Thursday.
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It noted that export growth has fallen to 0.4 per cent owing to "disappointing sales of textiles", which constitute 60pc of the country’s goods exports. "GDP growth has remained weak at 3.3pc in both 2018 and 2019 – well below the 4 to 6pc range of previous years," it said.
Meanwhile, the State Bank of Pakistan is balancing a stronger commitment to inflation targeting with a managed depreciation of the currency, but this is complicated by increases in energy tariffs that have been imposed as part of the fiscal reforms package.
"While the tightened monetary policy in Pakistan is expected to help move inflation towards target levels in the years to come, the country’s inflation remains extremely vulnerable to fuel price fluctuations and weather conditions, as is the case for most countries in the region," the report cautioned.