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Fiscal to slow to 3.5% in 2023 amid strong climate headwinds: ADBTAZAA News

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ISLAMABAD: Pakistan’s economy is expected to slow to 3.5 percent in fiscal 2023 amid devastating floods, policy tightening and critical efforts to address significant fiscal and external imbalances, the Asian Development Bank (ADB) said in a report released on Wednesday.
A slowdown is expected in FY 2023 (ending June 30, 2023) though growth is expected to touch 6.0% in FY 2022.
According to the Asian Development Outlook (ADO) 2022 update, gross domestic product (GDP) growth in Pakistan in FY2022 was propelled by higher private consumption and expansion in agriculture, services and industry – particularly large-scale manufacturing.
But in FY2023 – as well as climate headwinds and Pakistan’s critical policy efforts – ADB’s low growth forecast also reflects double-digit inflation. The latest report is an update to ADB’s annual flagship financial publication.
“The recent devastating floods in Pakistan pose a serious risk to the country’s economic outlook,” said Yong Yeh, ADB Country Director for Pakistan.
“We hope that flood-related reconstruction and economic reforms will catalyze significant international financial support, stimulate growth and preserve social and development spending to protect the vulnerable. ADB is preparing a package of relief, rehabilitation and reconstruction to support people, livelihoods and infrastructure in the immediate and long-term,” Yong Ye added.
The economic outlook is largely shaped by restoring political stability and continued implementation of reforms under a renewed International Monetary Fund program to stabilize the economy and restore fiscal and external buffers.
According to the update, private consumption increased by 10% in FY2022, resulting in improved employment conditions and higher household incomes.
Agricultural output up 4.4% in FY2022, supported by strong performance in crops and livestock. Agriculture growth is expected to moderate next year due to flood damage and higher input costs, which may dampen growth in services, particularly wholesale and retail trade.
In FY2023, fiscal adjustments and monetary tightening are expected to suppress domestic demand. Contraction in demand, coupled with capacity and input constraints due to higher import prices from rupee depreciation will reduce industry output.
Inflation rose sharply in the fourth quarter (April-June) of FY2022, fueled by the removal of fuel and power subsidies, a significant depreciation of the rupee and a rise in international commodity prices.
Inflation rose to 21.3% in June, the highest since 2008, pushing average core inflation to 12.2% in FY2022. Inflationary pressures remain high in FY2023 with inflation expected to rise to 18%.
In addition to floods, downside risks to the outlook include higher-than-expected increases in global food and energy prices and rising inflation as general elections approach, the report adds. – APP

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