The World Bank forecasts that Pakistan is expected to pick up to a 5.2 per cent economic growth in fiscal 2017 (July 1, 2016 – June 30, 2017) and to 5.5 per cent in the next fiscal year which reflect an upturn in private investment to increase energy supply and improve security.

“The overall growth in the South Asian region is forecast to pick up to 6.8 percent in 2017 and accelerate to 7.1 percent in 2018 which reflect a solid expansion of domestic demand and exports,” World Bank’s June 2017 Global Economic Prospects said.

The report said that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade will rise market confidence and stabilise commodity prices which allow growth to resume in commodity-exporting emerging market and developing economies. The growth in advanced economies is expected to accelerate to 1.9 percent in 2017 which will also benefit the trading partners of these countries.

“Global financing conditions remain favorable and commodity prices have stabilised. Against this improving international backdrop, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016,” the report said.

“Growth among the world’s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for growth in other emerging and developing economies and globally. Nevertheless, substantial risks cloud the outlook. New trade restrictions could derail the welcome rebound in global trade,” the report continued.

The report said that Persistent policy uncertainty could dampen confidence and investment. Amid exceptionally low financial market volatility, a sudden market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence. Over the longer term, persistently weak productivity and investment growth could erode long-term growth prospects in emerging market and developing economies that are key to poverty reduction.

“For too long, we’ve seen low growth hold back progress in the fight against poverty, so it is encouraging to see signs that the global economy is gaining firmer footing,” World Bank Group President Jim Yong Kim said.

“With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term. Countries must also continue to invest in people and build resilience against overlapping challenges, including climate change, conflict, forced displacement, famine, and disease,” the report analysed.

The report highlights concern about mounting debt and deficits among emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions might be damaging.

“At the end of 2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by more than 5 percentage points of GDP in one-third of these countries,” the report added.

“The reassuring news is that trade is recovering. The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector. A bright spot in the outlook is a recovery in trade growth to 4 percent after a post-financial crisis low of 2.5 percent last year,” World Bank Chief Economist Paul Romer said.

The report highlights a key area of weakness in global trade among firms not linked through ownership. Such trade through outsourcing channels has slowed much more sharply than intra-firm trade in recent years. This is a reminder of the importance of a healthy global trading network for the less integrated firms that account for the majority of enterprises.

“After a prolonged slowdown, recent acceleration in activity in some of the largest emerging markets is a welcome development for growth in their regions and for the global economy. Now is the time for emerging market and developing economies to assess their vulnerabilities and strengthen policy buffers against adverse shocks,” World Bank Development Economics Prospects Director Ayhan Kose said.