Pakistan’s economic growth is projected to remain below potential, averaging 1.3 per cent for 2021-22, according to a new World Bank (WB) report titled “South Asia Economic Focus: Beaten or Broken, Informality and Covid-19” released on Tuesday.
The report analysed by a local media outlet states that this base-line projection, which is highly uncertain, has been predicted over the absence of significant infection flare-ups or subsequent waves that would require further widespread lockdowns, whereas the current account deficit (CAD) is expected to widen to an average of 1.5pc of GDP over FY22, with imports and exports gradually picking up as domestic demand and global conditions improve.
Further, the fiscal deficit is projected to narrow to 7.4pc in FY22, with the resumption of fiscal consolidation and stronger revenue driven by recovering economic activity and critical structural reforms.
On the other hand, expenditures will remain substantial due to sizeable interest payments, a rising salary and pension bill, and absorption of energy state-owned enterprise (SOE) guaranteed debt by the government, the report says.
Finally, external financing risks could be compounded by difficulties in rolling-over bilateral debt from non-traditional donors and tighter international financing conditions, the report says.
It is pertinent to mention here that the State Bank of Pakistan (SBP), WB and the government had presented different figures on GDP growth in FY21 earlier in January.
While SBP has predicted the real GDP growth of the country cautiously, which may witness an increase in the range of 1.5 per cent to 2.5 per cent in the fiscal year 2021 amid uncertainties of Covid-19 and its impact on economic activities, the World Bank, in its report titled “Global Economic Prospects (GEP) 2021” stated that Pakistan’s economic growth rate for the current fiscal year is forecast to remain subdued at 0.5 per cent due to continued fiscal consolidation pressures and service sector weakness.
On the other hand, the government has set a GDP growth target of 2.1 per cent for the current fiscal year.
To note, for FY21, the government has set the fiscal deficit target at 7 per cent of GDP, lower than the actual deficit last year (8.1 per cent). Whereas, for the primary deficit, the government has set a target of 0.5 per cent of GDP compared to the actual deficit of 1.8 per cent last year.