Pakistan’s economic outlook for the fiscal year 2023 (ending 30 June 2023) has deteriorated under heavy flooding that began in mid-June, says the Asian Development Bank (ADB).
According to Asian Development Outlook (Supplement December 2022), the economy was already struggling to regain macroeconomic and fiscal stability before the floods, which adversely affected cotton, rice, and other important crops. As wheat is usually planted from mid-October, flood damage threatens the upcoming agricultural season as well, it adds.
Further, the flooding is expected to have spillover effects on the industry, notably textiles and food processing, and on services, in particular wholesale trade and transportation. Flood disruption and damage are expected to slow real GDP growth in combination with a tight monetary stance, high inflation, and an unconducive global environment.
According to the report, the South Asian forecast for 2022 is maintained at 6.5 per cent but revised down marginally for 2023 from 6.5 per cent to 6.3 per cent following a slowdown in Bangladesh and flooding in Pakistan.
In Bangladesh, recovery is hampered by external imbalances and unexpectedly high inflation while in Pakistan, floods that began in mid-June have dampened economic activity already affected by stabilization efforts to tackle sizable fiscal and external imbalances and double-digit inflation.
The 2022 forecast for Southeast Asia has been upgraded from 5.1 per cent to 5.5 per cent on robust consumption and tourism recovery in Malaysia, the Philippines, Thailand, and Vietnam, however, the 2023 forecast has been revised down to 4.7 per cent as global demand weakens.
The inflation projection for South Asia has increased marginally for 2022 from 8.1 per cent to 8.2 per cent and more substantially for 2023 from 7.4 per cent to 7.9 per cent.
The sub-regional revision for 2023 largely reflects higher inflation forecasts for Bangladesh, Nepal, Pakistan, and Sri Lanka. Inflation forecasts for elsewhere in the sub-region in 2023 remain unchanged.