| GEO Business|
| ADO sees Pakistanís GDP improve to 3pc in 2010|
| Updated at: 1433 PST, Tuesday, April 13, 2010|
ISLAMABAD: The Asian Development Outlook 2010 (ADO 2010), released on Tuesday, forecasts Pakistanís GDP growth in 2010 to modestly improve to 3.0 percent backed by a recovery in the manufacturing sector.
ADO, the Asian Development Bankís flagship annual economic publication said that inflation in FY 2010 projected to fall to 12 percent from its peak of the previous fiscal year is still high.
On the external side, the ADO added, current account deficit backed by the still robust remittances is also projected to fall to 3.6 percent of GDP from 5.6 of GDP a year earlier.
While macroeconomic imbalances have narrowed and economic fundamentals have improved, the ADO 2010 notes that the security environment and an ongoing power crisis are both burdening the fiscal situation and obstructing a growth revival.
That revival, according to the ADO, will depend on multiple factors and stresses a faster implementation of ongoing measures in taxation and energy sector which are critical to generate required fiscal space.
A key issue is the financing of the fiscal deficit, it said adding that rapid fiscal improvements were needed to underpin recovery, sustain the public sector development programme, and prevent crowding out of the private sector.
The ADO also emphasizes the need to generate a diversified, vibrant and higher value added export base to contain the current account deficit and improve debt profile of the country, as well as ensure faster growth and employment creation.
ADO said that Pakistanís economic prospects are predicated on a successful completion of the current IMF programme by end-2010; a gradual improvement in the security situation; a phased reduction in electricity shortages as tariffs meet cost of supply and new power plants are commissioned; sustained implementation of fiscal reforms, particularly for tax and administration; a gradual economic recovery in the main trading partners; and political stability.
The ADO highlighted three interconnected development challenges facing Pakistan. The first is fiscal situation, second low growth and the challenge to revive it so as to create jobs and reduce poverty while the third is to improve the competitiveness of the economy so as to expand exports, sustain growth, and avoid balance-of-payments problems in the future.
Asian Development Outlook, is ADBís annual flagship economic report analyzing the economic conditions and prospects in Asia and the Pacific, and is issued in April.