• Thursday, December 12, 2019

Economy stagnating amid big deficit, low reserves: World Bank

Discussion in 'Pakistan Economy' started by bl33d, Oct 14, 2019.

  1. bl33d

    bl33d FULL MEMBER

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    https://www.dawn.com/news/1510722

    The World Bank has said Pakistan’s economy is slowing as it faces yet another macroeconomic crisis due to high twin deficits and low foreign reserves.

    In the latest edition of its report titled “South Asia Focus: Making (De)centralisation Work”, that was released on Sunday, the Bank noted that with an IMF extended fund facility-supported stabilisation programme in place, the country’s economic growth was expected to remain low in the near term.

    The outlook for medium-term growth, meanwhile, hinged on the country’s ability to implement necessary structural reforms to boost competitiveness and achieve sustained growth, said the report.

    Progress on poverty reduction was expected to be limited during the macroeconomic adjustment period, it added.

    According to the report, measures to restore macroeconomic stability in Pakistan weigh heavily on growth, which is expected to have dropped to 3.3 per cent.

    Economic policies over the past few years have resulted in increased debt levels and an erosion of fiscal and external buffers, affecting the economy’s ability to absorb shocks. The country needs to restore these buffers, especially because turbulence in global financial markets could affect the country’s access to private external financing. And the weakening global economy and rising trade tensions could dampen external demand.

    Growth expected to remain low in the near term

    “Increased pressures on the asset quality and capital adequacy buffers due to the economic slowdown and inflationary environment could hold back the forecast rebound in growth, especially when strong short-term deposit mobilisation due to recent increases in policy rates continues to be intermediated mostly towards government securities,” said the report.

    The main domestic risk emerges from potential difficulties in implementing the necessary adjustments and structural reforms. The vulnerable households’ ability to weather the economic impact of the crisis will depend on the inclusiveness of growth, the food and non-food inflation, and the resilience of sectors relevant for their employment — agriculture, construction and wholesale and retail trade.

    About the outlook, the report said growth was projected to decelerate to 2.4 per cent in the fiscal year 2020, with continued fiscal consolidation and a tight monetary policy stance. The IMF adjustment programme entailed a rebalancing from domestic to external demand.

    The report said growth was expected to recover slowly, to 3pc in fiscal year 2021, as macroeconomic conditions improved and external demand picked up on the back of structural reforms and increased competitiveness. This recovery was conditional on relatively stable global markets, a decline in international oil prices and reduced political and security risks, said the report.

    Inflation is expected to increase in fiscal year 2020 to 13pc but it will start declining afterwards. The increase in prices will be driven by the second-round impact of exchange rate pass-through to domestic prices.

    The report said the country’s commercial banks would remain well-capitalised. However, increasing public sector demand for credit, mainly federal government borrowing, and rising interest rates were expected to crowd out private credit in the near-term.

    The current account deficit was expected to decline to 2.6pc of GDP in fiscal year 2020 and further to 2.2pc in fiscal year 2021, as increased exchange-rate flexibility would support a modest recovery in exports and rationalisation of imports.

    The consolidated fiscal deficit including grants was projected to reach 7.5pc of GDP in fiscal year 2020 and remain elevated at 6.2pc in fiscal year 2021. The public debt-to-GDP ratio was expected to remain high in fiscal year 2021 at 80.8pc, increasing the exposure to debt-related shocks, said the World Bank report.

    Fiscal consolidation across the federation would be needed for the public debt to decline, but the debt-to-GDP ratio was not expected to fall below 70pc of GDP — the debt burden benchmark for high-risk emerging markets — over the medium term. Pakistan’s debt vulnerabilities would remain high due to large foreign currency debt amortisations and sizeable refinancing of short-term domestic debt.

    According to the report, progress in poverty reduction, which was uninterrupted since 2001, is expected to stall during the macroeconomic adjustment period due to decelerating growth and higher inflation rates. The poverty headcount, measured using the $1.9 per person per day international poverty line, is projected to remain at the fiscal year 2019 level (3.1pc). Poverty measured using the $3.2 line is expected to decline from 31.4pc last year to 31.2pc in fiscal year 2020, while poverty measured using the $5.5 poverty line is projected at 72.5pc in fiscal year 2020, compared to 72.6pc in fiscal year 2019.

    Exports grew faster than imports in the first two quarters of 2019, suggesting weak domestic demand. Thus, weakening global conditions do not seem to be affecting South Asia through the trade channel.

    Apart from Pakistan, South Asian exports continued growing fast in the first quarter of this year, but export growth moderated strongly in India in the second quarter. Import growth, on the other hand, has declined severely across countries in South Asia, and imports even contracted between 15pc and 20pc year-on-year in Pakistan and Sri Lanka, according to the report.

    Across South Asia, food prices have been increasing in the last few months. Food prices in 2018 were stable in Pakistan, Afghanistan and Nepal but fell in India, Maldives and Sri Lanka. However, food prices recently have been increasing in all countries except Sri Lanka.

    In Pakistan, Afghanistan, Nepal and Bangladesh, food prices are more than 6pc higher than a year ago.

    Suggesting that it is losing its shine, the report says economic activity is moderating in many South Asian countries in line with global developments. Most South Asian countries are expected to grow below long-run averages this year.
     
  2. GHALIB

    GHALIB BANNED

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    for the time being it is busy in international diplomacy .
     
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  3. Fawadqasim1

    Fawadqasim1 SENIOR MEMBER

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    Phir bhee patwari kehtay Hain keh Imran govt ka kasoor hay
     
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  4. Rusty

    Rusty SENIOR MEMBER

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    News article from dawn dawn and posted by an Indian.
    Move along , nothing to see here.
     
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  5. W.11

    W.11 BANNED

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    living in canada, it is very easy to say that, but living and suffering ground reality is different.

    regards
     
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  6. Rusty

    Rusty SENIOR MEMBER

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    You have no one to blame but yourself

    You gave 10 years to Zardari and Nawaz even though you knew they were going to destroy the country.

    They destroyed the country and now you are giving surprised Pikachu face.

    Lucky for you someone is giving you medicine, it's bitter now but it will cure you in the future.
     
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  7. bl33d

    bl33d FULL MEMBER

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    Whats your problem with the article and whats the problem with Indian posting it, its irrelevant if whats in the article stands strong. A nice cop out for people who dont like to face realities or atleast have the guts to debate.
     
  8. Rusty

    Rusty SENIOR MEMBER

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    I have every problem with dawn and India, both are such good allies that Indians should start using dawn as toilet paper when they finish pooping in the streets.

    If you check reputable International media they are reporting all the progress Pakistan has made in just one year.
     
  9. bl33d

    bl33d FULL MEMBER

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    I cant imagine how your life must be if you spend in talking about poop so much. Anyway that aside, many pakistani news block their sites to India, many publish in Urdu and hardly any does give a reality check.
    Have problem with the content - Debate on that.
    Ad hominem attacks dont help your case.

    Do share some here.
     
  10. Rusty

    Rusty SENIOR MEMBER

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    Instead of getting angry at me for pointing out that you people poop in the streets, why not.....you know.....not poop in the streets?


    And I don't have a case, I am just pointing out that dawn has an ati PTI/Imran Khan agenda.

    I don't even doubt their facts, I doubt their intentions.

    If they were objective, they would be saying that the reason we are here is 100% due to 10 years of Zardari and Nawaz.

    But I don't expect street poppers to fully understand what I am saying.:toast_sign:
     
  11. bl33d

    bl33d FULL MEMBER

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    Your country has 40m people toiletless. You can mock all day, but Indians have taken it upon themselve to solve the crisis and in a few years it will be eradicated. But you know what, you will still stay the same while writing nonsense here.

    On the point, there are media with opposing narratives in every country. That helps. Or you just want to be an authoritarian state like China? IK has left no doubt about his love for China style state control.

    Thats your internal political problem. Your economy is their irrespective of who is in power. Once again, people like you just derail conversation.
     
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  12. W.11

    W.11 BANNED

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    since your favourite political party is ruling now, you should come back here and improve the situation.

    regards
     
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  13. Rusty

    Rusty SENIOR MEMBER

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    Did you forget to put the poo in the loo?
    This was 5 years ago btw, we've been hearing "soon" for at least half a decade.

    And its rich that an Indian is talking about dictatorships, your pm is part of a movement meant to emulate dictatorships.

    Why?

    My favors dessert is ice cream, doesn't mean I need to live in an Ice cream factory
     
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  14. bl33d

    bl33d FULL MEMBER

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    Ya, go cry a river about RSS, you call it fascist, dictatoriship, whatever ship.There are 1.3 billion people and 900m vote. Whatever goes, it will get fixed here. You just take care of your army, fauzi companies, military coupes and PMs in jail.
    Let Indians worry about Indian politics.
     
  15. W.11

    W.11 BANNED

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    if you dont want to come, stop being relevant like ''real'' pakistanis, you foreign nobody.

    regards
     
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