ISLAMABAD: Asian Development Bank has forecasted moderate GDP growth of 3.4 percent in Pakistan during the year 2014 as the government’s reforms and stabilization efforts took effect.
The Bank in its recent Asian Development Outlook 2014 (ADO) report said that due to reforms and stabilization introduced by the government, Pakistan’s economy is showing signs of recovery in 2014.
However, it said that macroeconomic and security challenges continue to weigh on which need to be addressed to maintain the current momentum.
The Asian Development Outlook 2014 (ADO,) which was released on Tuesday further said that although growth in South Asia is inching up, it remained the slowest growing sub-region with GDP expanding by 4.8 percent in 2013, compares to the GDP growth rate of 6.5 percent experienced by Central Asia during the same period.
The report said that continued energy sector subsidies, growing losses incurred by state-owned enterprises and high expenditures for national security are some of the factors testing Pakistan’s financial discipline in recent years.
The ADO notes that structural reforms to broaden Pakistan’s revenue-base through better tax administration and eliminating exemptions are critical for fiscal sustainability and the reallocation of resources to promote investment and economic growth.
Currently, over 90 percent of provincial revenues are transfers of federal shared taxes, it added.
As provinces have assumed a greater share of federal resources and spending responsibilities through devolution, their fiscal performance has become even more important in relation to the national fiscal outcome, the report said.
It said that large scale manufacturing sector, which grew with a stronger rate of 6.7 percent during the first 6 months of FY 2014 presents a silver lining.
The Asian Development Outlook 2014 further said that the exports from the country also picked up and are expected to grow further in the remainder of the fiscal year.
Rising level of worker remittances and the reserves held by the State Bank of Pakistan reflecting the steady foreign inflows are other positive signs on the horizon of economic recovery, it added.
The report said that inflation remains in single digits but it required to further bring down for the welfare of the people in the country.
Speaking on the occasion, ADB’s Country Director for Pakistan, Werner E. Liepach said that like other countries in the region, Pakistan needs to safeguard the poor from adverse effects of fiscal adjustments and other negative shocks.
To this end, he said that the direct cash transfer to poor families through social protection programs provides vital help in shielding the vulnerable groups.
He said that about US$ 500-600 million inflows from ADB are expected for Pakistan by the end of this fiscal year for different projects of social sector development.
He said that these inflows are expected to reach US$ 900 million to 1 billion during next 2-3 years.