– The Asian Development Bank (ADB) has projected a robust growth by Pakistan's economy during the fiscal year 2005-06, noting significant recent decline in poverty as estimated by the government based on a sound methodology, ADB's Pakistan Economic Update said. ADB's Resident Mission in Pakistan has prepared the report, which provides an analysis of economic trends in Pakistan during the first three quarters of fiscal year 2005-06, and presents an outlook of the economy for the whole year. ADB Country Director Peter Fedon said the medium term outlook for the economy looks good and although economic growth decelerated in the first half of 2005-6, the economy is expected to still post robust growth for the full year. The Update notes the significant recent decline in poverty as estimated by the government based on a sound methodology. The Report also discusses recent poverty trends in the country and reviews poverty reducing public expenditure during the first half of 2005-06. It highlights that the outlook for the economy is encouraging. Economic growth, although less than last year, will remain at a healthy rate of 6 to 6.5% in 2005-6. The growth in agriculture sector is expected to be sluggish due to the smaller cotton and sugarcane crops as is the growth of the livestock sub-sector. However, the large-scale manufacturing sector is projected to grow at a robust rate of 10.0 percent, as indicated by the sharp increase in imports of raw materials and rapid growth in private sector credit. In the services sector, telecom services, banking and trade are expected to sustain high growth in 2005-06. With robust economic growth and a sharp increase in imports, the target for revenues is likely to be surpassed. Expenditures are also projected to exceed the budget estimates, the report said. As a result, the budget deficit in 2005-6 could rise to 4.2 percent of GDP compared with the target of 3.8 percent. Imports are projected to increase by 30.0 percent, because of high oil prices and continued strong domestic demand. The end of the quota regime since January 2005 and the robust growth in world trade will boost exports, which are expected to increase by 14.0 percent. The trade deficit is projected to increase to over $ 8.0 billion, and the current account deficit to $ 6.0-6.5 billion. According to the report, the medium-term outlook is positive. The substantial public sector investment in irrigation and private investment in agriculture in the last four years will boost the agriculture sector. The end of the quota regime for textile and clothing exports and large investment in textile industry in the past 4-5 years will continue to energize the manufacturing sector. Continued policy action would be required to deal with the external imbalance and monetary overhang. In the longer run, levels of investment in the economy need to be enhanced so as not to constraint growth and poverty reduction efforts, the report said.
