Islamabad, Sep 18 (IANS) The Asian Development Bank (ADB) has revised its growth forecast for Pakistan, reducing it to 6.5 percent from the targeted 7.2 percent for the current fiscal, and said the country could also miss other economic targets.
In its Asian Development Outlook 2007 update released on Monday, the ADB said some key political questions along with economic constraints, including power shortages, needed to be resolved for sustainable GDP growth.
“The lack of industrial and export diversification has to be rectified, to bring down persistent growth in the current account deficits to levels consistent with sustainable financing,” Dawn Tuesday quoted the report as saying.
“The fundamental issue is a resolution of the current political uncertainties,” it added.
According to the report, the forthcoming presidential and parliamentary elections should be “seen by the population as fair” and pointed to the need to “ensure continuity and coherence of economic policy, to sustain economic and governance reforms”.
Pointing to Pakistan’s growth that averaged 7.5 percent during 2003-2007, the bank said this could be sustained in the medium term if macroeconomic fundamentals remained strong and policy commitment to governance and economic reforms continued.
“Also, despite recent improvements, the still-low investment and saving rates represent a constraint to achieving and maintaining high growth, and that has to be addressed,” the report stated.
The bank projected slow growth in Pakistan’s exports due to continuing weaknesses in the textiles sector but said imports were likely to rise. This would be reflected in a larger oil bill.
Thus, the trade deficit was “likely to remain heavy at $11.4 billion or 7.1 percent of GDP”.
The bank also noted with concern the concentration of higher foreign direct investment (FDI) in four sectors – telecom, financial, oil and gas and tobacco – and called for diluting this to reduce the volatility attached to these flows.
It said that unlike some other countries in the region, “Pakistan attracts little FDI into manufacturing”, which needed to be remedied to stimulate economic and employment growth by bringing in improved technologies, business practices and innovation to raise the level of manufacturing competitiveness and to accelerate structural change.