Islamabad [Pakistan], April 11 : The Asian Development Bank (ADB) cited political instability, devastating floods, and policy slippage as major obstacles to Pakistan's economic progress in its annual Asian Development Outlook Report 2024.
The ADB also cited uncertainty as a risk to the nation's efforts to stabilise, recover, and implement reforms, reported Geo News.
"The economy contracted as devastating floods, political unrest, and policy slippage curbed investment, consumption, and production," the report read, adding that the country's GDP declined by 0.2 per cent in fiscal year 2023 (FY2023, ended 30 June 2023) following 6.2 per cent expansion in FY2022.
The regional development bank reports that while public investment fell by 31.6 per cent due to a lack of fiscal resources, private investment fell by 14.6 per cent in line with the gloomy outlook.
Private consumption growth on the demand side decreased to 2.4 per cent from 7.1 per cent in FY2022 due to higher living expenses and slower nominal income growth amid a weakening of employment.
"A steep decline in imports from ad hoc import controls allowed net exports to contribute positively to growth," it added.
The bank maintained that the growth in Pakistan is projected to grow by 1.9 per cent this year, driven by a rebound in private sector investment linked to progress on reform measures and transition to a new and more stable government, reported Geo News.
"In FY2025, growth is projected to reach 2.8 per cent, driven by higher confidence, reduced macroeconomic imbalances, adequate progress on structural reforms, greater political stability, and improved external conditions," the report added.
The report further added that the construction industry's growth has been impacted by growing expenses and tax increases, and that Pakistan's deficit is predicted to reach a high point of 25 per cent this fiscal year.
According to ADB, Pakistan's external payment sources will have to be friendly nations and international financial organisations.
The bank stated in the report that "inflation reached a 5-decade high as supply disruption and currency depreciation propelled increases in food and energy prices."
It also added that increased energy prices will keep inflation rates high this year, at roughly 25 per cent. It also stated that food commodity prices will level out the next year.
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