Despite increasing fears Pakistan gross domestic product growth (GDP) is expected to grow 4.5 percent in the current fiscal year, the World Bank said in an assessment. The bank in its ‘Pakistan Development Update’ expecting 4.8 percent growth in the next fiscal year (FY 2016-17).
The report says current account deficit narrowed to $2.6b in FY2014-15 compared to $3.1b in the previous year, a result of record high remittances in the order of $18.7 b from the overseast workers.
Pakistan’s GDP has been supported by strong services growth and a slight improvement in the industry sector, says the World Bank Update launched on Wednesday. The report discusses the important improvements in the external sector in Pakistan over the past few years. The foreign exchange reserves have increased from precariously low levels to appropriate level given the size of Pakistan’s imports. “There is an improvement in Pakistan’s overall economic environment. With macroeconomic stability largely restored, Pakistan can focus now on boosting development outcomes, which are not where one would expect, given the country’s income level”, says World Bank Country Director for Pakistan Patchamuthu Illangovan.
“To improve the country’s competitiveness, it is extremely important that the next phase of reforms is implemented and that Pakistan increases both public and private investment levels, which are among the lowest in the world”, he added. Constrained fiscal space limits the government’s ability to make the necessary complementary public investments. A weak investment climate also affects private investment negatively, he said. Another reason for the very low investment levels has to do with the low domestic savings rate in Pakistan at below 10 per cent of GDP, which compares unfavorably with an average of around 25 per cent in South Asia.