The World Bank has revised the growth forecast for Pakistan’s up from 0.8 percent previously projected in January to 1.3 percent now for the current fiscal year.
The revision has come in the wake of increased remittance inflows. WB published its flagship report on global economic prospects, which stated, “The forecast for Pakistan has been revised up on improving remittance inflows and a rebound in confidence, but the economy is expected to grow by only 1.3 percent in fiscal year 2020/21, reflecting contracting investment, fiscal consolidation, and depressed activity amid recurring COVID-19 flare-ups.”
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The report added, “Fiscal and monetary policies are expected to remain accommodative in the forecast period. Real policy interest rates – an indicator of the policy support provided by central banks – are expected to remain negative in 2021.”
However, despite this revision, the growth forecast for Pakistan trails behind other economies in the region, with Bangladesh at 3.6 percent, India at 8.3 percent, Maldives at 17.1 percent, Nepal at 2.7 percent, and Sri Lanka at 3.4 percent.
The report said, “Recoveries in Pakistan face new headwinds from a recent rise in COVID-19 cases accompanied by rising restrictions to stamp out the new surge. Mobility around places of work and retail has again dropped below pre-pandemic levels.”
WB also estimated that growth in Pakistan would gradually return to 2 percent in the next fiscal year and jump to 3.4 percent by FY2023. This is a notable improvement on the 0.5 percent contraction recorded in the previous fiscal year.
The actual figure for the current and upcoming fiscal years’ growth will be determined by the large-scale manufacturing (LSM) numbers of June, said the Finance Minister, Shaukat Tarin. The minister expects the actual recovery of the large-scale industry to be different and higher compared to the cautious stance taken by the central bank.
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The State Bank of Pakistan (SBP) has also revised the growth projection to 3 percent from previously 2 percent, accounting for the revival in the manufacturing sector after lockdown and fiscal stimuli provided by the government and international bodies amid the COVID-19.
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