Pakistan’s economic crisis eased a little in 2009 as the Government’s stabilization program took effect, says the Asian Development Bank (ADB) in a major new report. The Asian Development Outlook 2009 Update (ADO Update), released on Tuesday, forecast growth of 2% in Pakistan in 2009.
The Update also forecasts economic expansion in developing Asia to come in at 3.9% in 2009, up from the 3.4% expected in March when the ADO 2009 was released.
In 2010, the growth projection is likewise upgraded to 6.4% from 6.0%. Stronger growth in East Asia and South Asia underpinned the improved prospects.
“Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown,” said ADB Chief Economist Jong-Wha Lee.
For Pakistan in 2009, the Update notes that fiscal and external imbalances narrowed, the exchange rate stabilized and foreign reserves rose.
However, inflation remains high and growth slowed from the impact of power outages, tight domestic demand management, uncertain security, and the global recession.
The economy is expected to register a modest improvement as real GDP growth rises to 3.0% in 2010, but this is subject to substantial risks, the report says.
“Pakistan’s economic outlook in 2010 will be shaped by both internal policies and global economic developments,” says Rune Stroem, ADB’s Country Director for Pakistan.
“Internally, economic outcomes will depend on the Government’s ability to achieve the desired balance between fiscal consolidation and revival of growth. Externally, it will depend on the degree of improvement in major trading partners, the consequent impact on Pakistan’s exports and on receipts of workers remittances, and international oil prices.”
The ADO Update 2009 stresses structural improvements in the underlying fundamentals are needed to address the key downside risks and challenges to the country’s economic outlook. Critical measures to improve revenue mobilization are required to support large scale spending on infrastructure and social sectors.
In an era of rising international oil prices, improvements to the country’s current account are crucial, the report says. It underlines the critical need for effective measures to build a much larger export base that is sufficient to finance oil, machinery, and other essential imports.
The report emphasizes both immediate and long-term measures to address the power crisis.
Asian Development Outlook, and Asian Development Outlook Update, are ADB’s flagship economic reports analyzing the economic conditions and prospects in Asia and the Pacific, and are issued in March and September, respectively.
ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration.
Established in 1966, it is owned by 67 members - 48 from the region. In 2008, it approved $10.5 billion of loans, $811.4 million of grant projects, and technical assistance amounting to $274.5 million.