ADB says signs of stabilization emerging

The Asian Development Bank (ADB) on Wednesday said that signs of economic stabilization are emerging in Pakistan during the ongoing fiscal year 2019-20.

The ADB in its latest supplement to its Asian Development Outlook 2019 Update stated that despite tight monetary policy and a modestly strengthening currency, inflation in Pakistan averaged 10.1 percent in the first 3 months of fiscal year 2020. However, earlier in September this year ADB stated that inflation remained elevated at the start of fiscal year 2020 at 9.4 percent in July and August.

Following a steep growth slowdown in Pakistan to 3.3 percent in fiscal year 2019 (ended 30 June 2019), signs of economic stabilization are emerging in fiscal year 2020, as forecast in the update, the Bank maintained. Earlier in September 2019, ADB had stated that given the need for the authorities to address sizeable fiscal and external imbalances, the economy is expected to slow further, with GDP growth projected at 2.8 percent in fiscal year 2020.

In its latest Update, ADB maintained that except India, economic growth in the rest of South Asia is on track to meet forecasts.

The South Asian GDP growth forecast for 2019 is cut from 6.2 percent in the Update to 5.1 percent, and for 2020 from 6.7 percent to 6.1 percent. These revisions reflect lowered growth projections for India at 5.1 percent in fiscal year 2019 (fiscal year 2019, ending 30 March 2020) and 6.5 percent in fiscal year 2020. Having already slowed year on year from 5.8 percent in Q4 of 2018 to 5.0 percent in Q1 of 2019, growth in India fell further to 4.5 percent in Q2, the lowest quarterly rate since Q4 of 2012. This put growth in the first half of fiscal year 2019 at 4.8 percent as expansion in private consumption slowed to 4.1 percent and in investment to 2.5 percent. In Afghanistan, concerns about security and political uncertainty stemming from a presidential election in September 2019 continue to weigh on economic activity, but favorable weather and continued external assistance should support growth.

In Bangladesh, accommodative policy on credit to the private sector is expected to promote investment, and strong remittances, which surged by 20.5 percent in the first 4 months of fiscal year 2020 (ending 30 June 2020), will stimulate domestic demand. Despite a slight reduction in Q1, exports are expected to pick up thanks to trade redirection and the government's fiscal support to export-oriented businesses.

In Bhutan, hydropower production increased by 3.1 percent in Q1 of fiscal year 2020 (ending 30 June 2020), reversing 2.3 percent decline in the same quarter of FY2019. Tourism has been strong in Maldives, with arrivals growing by 15.8 percent year on year in the first 9 months of 2019, and several new government infrastructure projects commenced in Q4 of 2019, promising to support growth.

In Nepal, remittances fell slightly in the first 2 months of fiscal year 2020 (ending 16 July 2020), but foreign direct investment soared by 61 percent, encouraged by political stability and legal reform for foreign investment. Merchandise exports increased by 23 percent.

Growth in Sri Lanka dropped from 3.7 percent in Q1 of 2019 to 1.6 percent in Q2, after bomb attacks in April 2019 severely hit tourism and disrupted the economy. A recent presidential election is expected to improve political stability and aid economic recovery.