Pakistani GDP growth likely to drop to 4.5 percent: ADB

[Naveed Yaseen]

ASMA RAZAQ
ISLAMABAD (September 17 2008): Pakistan GDP growth is expected to decrease to 4.5 percent in the current financial year against 5.8 percent achieved in the last fiscal year, as the country would continue to face the deteriorated state of economic fundamentals and inflationary pressures, says a report of Asian Development Bank (ADB).

The GDP growth has been declining since 2006 when it, all of a sudden, decreased to 5.8 percent from 9 percent in 2005, indicating a downward trend of 35 percent. Compared to India's GDP, the report found that the growth rate of Pakistan was 36 percent less. The growth rate of India is expected to be 7 percent. The growth rate of Bangladesh in 2009 would be 31 percent more than that of Pakistan. Afghanistan GDP in 2009 is projected to be 8.3 percent that is 46 percent more than that of Pakistan.

The report reveals that the overall growth rate of South Asian region in 2009 has been estimated to be 6.7 percent that is 17 percent less than the 8.1 percent GDP growth rate of 2008. The report indicates that the GDP growth rate of China in 2009 is projected to be 9.5 percent that is 53 percent more than that of Pakistan.

The report extracted out that the developing Asian economies would revert to a more moderate growth outlook of 7.5% this year and 7.2% next year after posting its fastest growth of 9% in nearly two decades in 2007. The report revealed an inflation rate of 7.8% in 2008 in Asia and the Pacific, up from an earlier estimate of 5.1%. In 2009, inflation could reach 6.0%.

The report highlights that a supply shortage will remain a dominant issue in global commodity markets. The report also warns that the inflation spike now seen throughout developing Asia cannot be blamed solely on cost-push factors, such as high global commodity prices.

The Chief Economist of the Manila-based multilateral development bank, Ifzal Ali, said in the report: "The impact of high food and oil prices on inflation has been muted in most of Asia. This central finding has vast implications for monetary policies in the region. In particular, it means that monetary tightening will continue to be a principal instrument for fighting inflation in Asia. It's time to tighten our belts and for governments to cut subsidies, on fuel for example, that have shielded consumers from the brunt of the increases. These subsidies are not sustainable. When the subsidies are removed, renewed upward pressure will commence and will raise inflation."

The report also recognises that the regional outlook remains tied to the fortunes of industrial countries. "Uncoupling is a myth," Ali said. "Our study shows that the region still depends on industrial countries to fuel its growth. If the global slowdown extends beyond 2009, the repercussions for the region could be severe." Overall, the report concludes, the key to fulfilling the region's enormous potential is the speed and success by which macroeconomic stability is restored and requisite structural reforms are adopted

http://www.brecorder.com/index.php?id=808281