InternationalVOLUME 16 ISSUE # 04

ADB’s depressing prospects for Pakistan

According to a report by the Asian Development Bank, Pakistan’s economy may grow at a pace of 2pc in the current fiscal year – the fifth lowest pace among South Asian countries. The Asian Development Outlook – Update showed that the Maldives, which was the worst affected by the spread of the coronavirus pandemic, could grow at the fastest pace of 10.5pc among eight South Asian nations. India, the second worst affected country economically by the pandemic, is projected to grow at a rate of 8pc in 2020-21, followed by 6.8pc growth in Bangladesh and 4.1pc in Sri Lanka. For Pakistan, growth is forecast to recover in the fiscal year 2020-21, as economic sentiment improves with the expected subsiding of Covid-19 and the resumption of structural reform.

The ADB’s projections are in contrast to the government’s claim that Pakistan’s economy is recovering at the fastest pace in the region. The only three countries that will grow at a pace lower than that of Pakistan are Bhutan (1.7%), Afghanistan and Nepal (1.5%). In the last fiscal year, Pakistan’s economy had contracted 0.4pc compared with a 20.5pc contraction in the Maldives and a 9pc decline in India. The ADB’s 2pc economic growth projection is in line with Pakistan’s growth target of 2.1pc. The ADB said its forecast of 2pc gross domestic product (GDP) growth assumes that Covid-19 impact will subside by the end of 2020 and the resumption of structural reform under an ongoing International Monetary Fund (IMF)’s Extended Fund Facility to address macroeconomic imbalances.

Agriculture is expected to continue to lend impetus to GDP growth. Growth in the industry is forecast to improve in FY21, led predominantly by construction and small-scale manufacturing. Spurred by improved growth in agriculture and the industry, coupled with an expected improvement in domestic demand overall, services should also contribute to growth in the current fiscal year, according to the report. The fiscal deficit is forecast to decline to 7pc of GDP in the current fiscal year as compared to 8.1pc in the last fiscal year. However, the current account deficit is anticipated to widen to 2.4pc of GDP against 1.1pc in the last fiscal year. Rising food prices pushed inflation to 10.7pc in the last fiscal year, which is now projected to slow to 7.5pc this fiscal year.

The ADB said remittances should continue to cushion the current account deficit but will likely be lower than the peak of $23.5 billion in the last fiscal year due to “layoff of Pakistani workers overseas, in particular in the Persian Gulf, as economic activity remains soft globally”.

“Pakistan has achieved a notable success in containing the dual health and economic challenge presented by Covid-19,” said ADB Country Director for Pakistan, Xiaohong Yang. As the curve flattens and business activity resumes, the economy is showing signs of resilience and recovery, she added. Along with the GDP growth forecast, the ADB has also shared findings of a new benchmark for determining the happiness of citizens of different nations under the Wellness Index. The index too does not project good health for the economy and society.

Out of 153 countries, Pakistan got a score of only 27.24, which placed it at 149th spot. Only four nations have performed worse than Pakistan. These are Afghanistan (23.56), Nigeria (23.75), Central African Republic (14.17) and Chad (8.38). Gross domestic product (GDP) per capita has been used historically as a de facto measure of a country’s success and wellbeing. While GDP captures material wellbeing, it often does not provide a comprehensive measure of wellness. The Wellness Index created by the Global Wellness Institute defines wellness with four pillars or dimensions – physical, intellectual, environmental and social.

The Wellness Index adopts a bottom-up approach, defining wellness at the individual level, which distinguishes it from other aggregate measures of national wellbeing. Asian rankings show the Republic of Korea and Singapore on top and Pakistan and Afghanistan at the bottom end. Over one-third of the Pakistani population does not have sufficient physical activity. The ratio is 20pc in men and 43.4pc in women. The recreational physical activity participation rate is only 13.2pc in Pakistan, which is the lowest in the Asia-Pacific region. Lower middle-income countries, such as India and Pakistan, face many challenges, including insufficient medical treatment, meagre healthcare budgets typically at less than 1pc of GDP, lack of capacity to spend funds effectively, dilapidated facilities and a critically low number of mental health professionals.