BEIJING: Pakistan has reasonably bright prospects for economic growth in the near term, says a World Bank report, but cautions that China’s economic slowdown and delay in energy and taxation reforms may threaten this outlook.
A report titled “South Asia Economic Focus Fall 2015” that the Washington-based lending agency released on Monday, disagreed with the government’s projection that the economy would grow 5.5% in the current fiscal year.
It not only put the growth projection at 4.5%, which is in line with estimates of other multilateral lending agencies, but also predicted next financial year’s growth at 4.8%.
This pace of expansion is far lower than the required 7% to absorb young entrants in the job market. In its election manifesto, the PML-N had promised to take the growth rate to 7% in fiscal year 2016-17.
Another bad news in the report was that exports would remain on the negative trajectory, for at least one more year.
“A mild recovery is under way, macroeconomic stability has largely been restored,” the report said, adding prospects for continued growth appeared reasonably bright, supported by strong fiscal consolidation and an improved external position.
However, it said the downside risks, chiefly the China slowdown, might affect this outlook. For a sustained and inclusive growth, Pakistan needs to successfully implement reforms in energy and taxation, and increase investment.
The report stated the slowdown in China, if protracted, could have adverse effects on investment and trade, and Pakistan may not have the ability to absorb external shocks in the absence of strong buffers.
Furthermore, realisation of tax revenue targets largely hinges on a steady implementation of tax reform agenda. Fiscal consolidation may also be negatively affected by delayed implementation of the government’s privatisation agenda. The privatisation programme has entered a critical phase of selling the loss-making enterprises, after the government successfully sold its remaining shares in profitable banks.
The World Bank report stated that for the economy to accelerate in the long run, key growth constraints like electricity shortages, cumbersome business climate, complex trade regime, low access to finance and security situation need to be addressed.
