Pakistan's recovery 'constrained' by moderate confidence, high inflation eroding purchasing power: ADB
Business
Says prices to ease amid fiscal consolidation, better availability of food and key imported inputs
MANILA (Web Desk) – Inflation in Pakistan averaged 28.5 per cent over the July–October period, but is expected to ease amid fiscal consolidation and monetary tightening, as well as the improved availability of food and key imported inputs, says the Asian Development Bank (ADB).
However, the ADB, in its latest report ‘Asian Development Outlook December’, notes that Pakistan’s overall recovery is still constrained by moderate confidence and high inflation eroding purchasing power.
The comments about Pakistan come as the Asia’s top financial institution kept the inflation forecast for South Asia unchanged at 8.6pc for 2023, but revised up to 6.7pc in the case of 2024 amid the expected higher prices in Bangladesh and Nepal.
“Despite several efforts to reduce inflation, the monthly rate in Bangladesh was close to double digits in July–October due to rising food inflation. Inflation is expected to ease in the coming months on continued contractionary monetary policy, measures taken to secure a market-based exchange rate, lower global commodity prices, and a better crop outlook.” It noted.
“The inflation forecast for Nepal in 2024 is revised up due to continued pressure on prices and the assumption of higher of international oil prices in 2024.”
However, inflation estimates in Maldives for 2023 are reduced slightly, as the average rate in the third quarter remained lower than projected earlier.
“India’s inflation forecasts for 2023 and 2024 are in line with recent data and so still within expectations,” the ADB noted.
About Sri Lanka, it says, “The inflation forecasts for Sri Lanka this year and next are unchanged since risks and assumptions are within earlier expectations.”
“Sri Lanka’s inflation rate in July fell to single digits after reaching 69.8pc in September 2022 on the increased availability of fertilizer, improved supplies of essential goods, gradual economic stabilization, and the base effect of high inflation in 2022.”
“Although electricity tariffs went up in October and value-added tax increases are expected in January, a deceleration in other inflation drivers is expected to offset these increases.”
Inflation in Developing Asia [a term used for the 46 member countries of ADB] was forecast to ease to 3.5pc this year, down slightly from ADB's earlier expectation, before rising slightly to 3.6pc in 2024.
WHAT ABOUT THE GROWTH RATE?
The report says South Asia was expected to post stronger growth of 5.7pc this year from 5.4pc previously, with India's economy seen expanding at a faster clip of 6.7pc.
In 2024, the GDP growth rate is expected to reach 6pc by year-end with India again leading the way with 6.7pc.
If we look at the entire Developing Asia, it is likely end the year on a brighter note, with growth in the region expected to be stronger than previously thought due mainly to a recovery in China's economy.
The ADB raised its 2023 growth forecast for Developing Asia to 4.9pc from 4.7pc projected in September, but kept its growth outlook for the region at 4.8pc next year.
The ADB also revised upwards its growth projection for China to 5.2pc from 4.9pc previously, but maintained its growth forecast for the world's second-largest economy at 4.5pc next year.
China's economy grew at a faster-than-expected clip of 4.9pc in the third quarter, while consumption and industrial activity in September also surprised on the upside, supported by a flurry of policy measures that bolstered a tentative recovery.
The ADB said robust domestic demand, stronger remittances, recovering tourism were underpinning economic activity in the region, which consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand.
