ISLAMABAD - The World Bank on Wednesday noted that Pakistan’s GDP growth would slow down to 5 percent in next fiscal year from 5.8 percent of the outgoing year.

Pakistan’s GDP growth rose to 5.8 percent in FY2017/18, supported by infrastructure projects funded by the China-Pakistan Economic Corridor (CPEC), improvements in energy supply, and persistent private consumption growth, the World Bank (WB) stated in its ‘June 2018 Global Economic Prospects report’.

The government had set GDP growth target at 6.2 percent for the next fiscal year after achieving 13-year high growth of 5.8 percent during FY2017/18. The Asian Development Bank (ADB) had already estimated that Pakistan’s economy is expected to slow down to 5.1 percent in the next fiscal year 2018-19 because of growing external account challenges. After ADB, the WB has also forecasted that GDP growth would slow down in next fiscal year. 

The WB said that a setback in the implementation of reforms to resolve weakening corporate and financial sector balance sheets could hold back the investment recovery currently underway and dampen credit growth in the region. An increase in political uncertainty might dampen the confidence and set back growth. In recent years, the number of people and geographical areas affected by natural disasters such as drought, floods, and earthquakes has risen in the region.

According to the WB, import growth is accelerating amid strengthening domestic demand, while higher energy prices are also contributing to a further deterioration of trade and current account balances. Monetary policy in the region has remained broadly accommodative and supported fast credit growth; however, the State Bank of Pakistan recently hiked its policy rate to reduce growing external pressures.

Despite recent softening, global economic growth will remain robust at 3.1 percent in 2018 before slowing gradually over the next two years, as advanced-economy growth decelerates and the recovery in major commodity-exporting emerging market and developing economies levels off. “If it can be sustained, the robust economic growth that we have seen this year could help lift millions out of poverty, particularly in the fast-growing economies of South Asia,” World Bank Group President Jim Yong Kim said. But growth alone won’t be enough to address pockets of extreme poverty in other parts of the world. Policymakers need to focus on ways to support growth over the longer run—by boosting productivity and labor force participation—in order to accelerate progress toward ending poverty and boosting shared prosperity.”

Growth in the South Asia is projected to strengthen to 6.9 percent in 2018 and to 7.1 percent in 2019, mainly as factors holding back growth in India fade. Growth in India is projected to advance 7.3 percent in fiscal year 2018/19 (April 1, 2018-March 31, 2019) and 7.5 percent in FY 2019/20, reflecting robust private consumption and strengthening investment. Pakistan is anticipated to expand by 5 percent in FY 2018/19 (July 1, 2018-June 30, 2019), reflecting tighter policies to improve macroeconomic stability. Bangladesh is expected to accelerate to 6.7 percent in FY 2018/19 (July 1, 2018-June 30, 2019).