ISLAMABAD: The World Bank on Wednesday said it was “surprised” by Pakistan’s growth in the year 2021, referring to record-high remittances and an accommodative monetary policy as the main reasons behind it.
The global financial institution analyzed the effects of the coronavirus pandemic on economies around the world in its Global Economic Prospects report.
It projected growth in the South Asia region to accelerate to 7.6 percent in 2022, as pandemic-related disruptions fade, before slowing down to 6 percent in 2023.
In its report, the World Bank revised growth projections since June 2021, based on “better prospects” in Pakistan, India and Bangladesh.
“Growth in Pakistan surprised on the upside last year supported by improving domestic demand, record-high remittance inflows, a narrow targeting of lockdowns, and accommodative monetary policy — real interest rates dropped precipitously during 2020 and remained negative throughout most of 2021,” the report read.
It forecasted Pakistan’s economy would grow by 3.4 percent in fiscal year (FY) 2021-22 and 4 percent in FY2022-23.
This would be brought about by “structural reforms enhancing export competitiveness and improving the financial viability of the power sector,” the report said.
The World Bank also pointed out some alarming aspects about Pakistan. The report stated that during the year, Pakistan’s goods trade deficit widened to record levels due to strong domestic demand and rising energy prices.
It noted that real government expenditures contracted in Pakistan due to fiscal pressures, while “high inflation in Pakistan led to the removal of monetary accommodation” in 2021.
The global institution projected India’s growth to be at 4.4 percent in FY2021-22 — 1.3 percentage points higher than in the June 2021 forecast — and 4.8 percent in FY2022-23.
Bangladesh fared impressively with regard to the growth outlook, according to the report. Output in Bangladesh was expected to grow by 6.4 percent in FY2021-22 and 6.9 percent in FY2022-23.
Regarding the global economy, the World Bank warned that it could constrict further.
Global economy was expected to slow down to 4.1 percent this year from an estimated 5.5 percent in 2021, the report read. It warned that omicron-related restrictions and disruptions could bring the figure down to as low as 3.4 percent.