ISLAMABAD : Pakistan is projected to experience a broad economic recovery in the current fiscal year (2020-21) as the economic sentiment improves with the expected subsiding of the coronavirus disease (COVID-19) pandemic and resumption of structural reforms, said Asian Development Bank (ADB) on Tuesday. The Asian Development Outlook (ADO) Update, which was released on Tuesday, revised the 2020 growth forecast for Pakistan to -0.4% and the growth forecast for 2021 to 2.0 percent. In April, ADB had forecast Pakistan to grow 2.6 percent this year and 3.2 percent next year. COVID-19 severely impacted economic activity in 2020, erasing gains achieved in the first half of the fiscal year. The suspension of travel and the closure of non-essential businesses induced concurrent demand and supply shocks. Rising food prices pushed inflation from 6.8 percent in FY2019 to 10.7 percent in FY2020; however, inflation is projected to slow to 7.5 percent in FY2021. The current account deficit eased considerably as merchandise imports fell steeply due to containment disruptions, lower oil prices, and local currency depreciation. In FY2021, the current account deficit is anticipated to remain contained at the equivalent of 2.4 percent of GDP, unchanged from the ADO 2020 forecast, said the report.
As inflationary pressures eased, the State Bank of Pakistan cut its policy rate by a cumulative 625 basis points from March to June 2020 to 7.0 percent and introduced additional measures to support the economic recovery. “Pakistan has achieved notable success in containing the dual health and economic challenge presented by COVID-19,” said ADB Country Director for Pakistan Xiaohong Yang.