ISLAMABAD: The Asian Development Bank (ADB) in a new report released on Thursday forecast Pak­istan’s economic growth will recover slightly during the fiscal year 2022-23, while it is expected to moderate in FY22 that ended last month.

Inflation is marginally revised up for FY22 and substantially so for FY23. In addition to the effects of elevated global energy and food prices, the government’s efforts to revive the stalled International Monetary Fund (IMF) programme has meant raising power tariffs and withdrawing subsidies in the oil and power sectors, says the supplement report of ‘Asian Development Outlook’.

In South Asia, the headline inflation is in double digits in Pakistan and Sri Lanka, and in most of the Caucasus and Central Asia and Southeast Asia. In Pakistan, the headline inflation, which was 12.3 per cent in December 2021, rose to 21.3pc in June 2022. But headline and core inflation in the rest of developing Asia’s large economies remain manageable, the report says.

So far in the region as a whole, inflation remains moderate on average and much lower than elsewhere in the world, it says.

The supplement report revised the growth forecast for developing Asia from 5.2pc to 4.6pc for 2022 and from 5.3pc to 5.2pc for 2023, reflecting worsened economic prospects because of Russia’s continued invasion of Ukraine, more aggressive monetary tightening in advanced economies, Covid-19 lockdowns in China.

The outlook compares with a projection of 5.2pc issued by the ADB in April. The bank also raised its forecast for inflation in the region, amid higher prices for food and fuel.

The ADB report lowered the economic growth of South Asia from 7pc to 6.5pc for 2022 and from 7.4pc to 7.1pc for 2023, mainly due to economic crisis in Sri Lanka and high inflation and associated monetary tightening in India. The inflation forecast for developing Asia is raised from 3.7pc to 4.2pc for 2022 and from 3.1pc to 3.5pc for 2023 due to higher fuel and food prices. Inflation pressures in the region are, however, less than elsewhere in the world.

Even though the impact of Covid-19 has declined across most of developing Asia, the economic fallout from Russia’s invasion of Ukraine on the region has increased. War-induced supply disruptions and escalating sanctions imposed on the Russian Federation have led to global commodity prices spiking and remaining higher than 2021’s already elevated levels. Because of this, inflationary pressures have increased in many regional economies.

Risks to developing Asia’s economic outlook remain elevated and mainly associated with external factors. A substantial slowdown in global growth could hurt exports, manufacturing activity, and employment prospects, and cause turbulence in financial markets. The aggressive monetary tightening by the Fed and other major central banks — even if largely anticipated — could damage growth and rattle financial markets in the region.

Published in Dawn, July 22nd, 2022