The World Bank has predicted that Pakistan’s economy is set to grow by a robust 5.4%t by 2018 as Chinese investment from a multi-billion dollar infrastructure project flows into the country.
Pakistan, South Asia’s second-biggest economy, is growing with security improving and the International Monetary Fund (IMF) claiming in October that it has emerged from economic crisis after completing a bailout programme, though it still faces major challenges.
Pakistan recorded a 4.7% growth in gross domestic product (GDP) for the fiscal year ended June 2016, the highest rate in eight years, and Prime Minister Nawaz Sharif has set an ambitious target of 5.7% for the current year.
In newly released report, the World Bank said that Nawaz was banking on structural reforms, the improved energy sector, taxation — and China’s ambitious $46 billion infrastructure project, the China-Pakistan Economic Corridor (CPEC), linking its western province of Xinjiang to the Arabian Sea via Pakistan.
The World Bank report appeared optimistic about Nawaz’s plans, predicting even further growth in 2018. “The pace of Pakistan’s economic growth will accelerate to 5.4pc in fiscal 2018,” the Bank report said, observing that a moderate increase in investment mainly related to CPEC projects is expected to contribute to an acceleration of growth.
The bank also noted Pakistan’s efforts to address grinding poverty, including with revised ways to measure it. “Based on the revised poverty line, the percentage of people living below the poverty line decreased from 64.3pc in 2002 to 29.5pc in 2014,” the report said.
Illango Patchamutu, World Bank country director for Pakistan, said the country needs to push forward with deeper structural reforms, and that the World Bank stood ready to support such an agenda.
Pakistan’s economic growth in fiscal year (FY) 2016 reached 4.7 percent—the highest rate in eight years and a significant increase from the previous year’s 4.0 percent, says a new World Bank Report.
The World Bank noted that South Asia continues to lead global growth, expanding by 6.8 percent in FY16. Like others in South Asia, Pakistan’s growth was driven by domestic consumption that continues to compensate for weak global demand. The report warned that Pakistan’s low rates of investment and declining export competitiveness, however, remain a concern.
Released twice a year, the Pakistan Development Update includes recent developments across the economy, the near-term outlook as well as special sections with a more detailed discussion of key development challenges for Pakistan.
Pakistan continues to make good progress in restoring macroeconomic stability. Building on this Pakistan needs to push forward with deeper structural reforms that spread benefits more widely, and the World Bank stands ready to support the reforms agenda.
Growth acceleration will depend on the implementation of structural reforms, such as energy and taxation and implementation of the China Pakistan Economic Corridor (CPEC). In the long term, growth will be driven by increased investment in both physical and human capital, with increased focus on better nutrition, health and education outcomes.
The World Bank highlighted Pakistan’s success in reducing poverty over the last decade and a half – but contrasted this with the lack of progress in health, education and nutrition outcomes since 2010.
Pakistan has made significant progress in reducing poverty over the last decade. Based on the revised poverty line adopted in early 2016, the percentage of people living below the poverty line decreased from 64.3 percent in FY02 to 29.5 percent in FY14. This reduction in poverty is corroborated when analyzing other data, such as asset ownership.
But stunting rates have been unchanged for decades and health and education outcomes have shown little improvement since 2010. By reinvesting its economic gains in health and education systems, Pakistan can make growth matter for all its citizens.
The report projects that the pace of Pakistan’s economic growth will accelerate to 5.4 percent in FY18. A moderate increase in investment (related to CPEC projects) is expected to contribute to an acceleration of growth, which will continue to be driven by public and private consumption