A gloomy Afghan growth projected
WASHINGTON (Pajhwok): The World Bank (WB) on Monday projected a dismal 1.5 percent growth rate for Afghanistan for the year 2014, attributing this to the uncertainty over political and security transition in the country.
Notably the annual growth had averaged 9.4 percent through 2003-2012, but real GDP growth (non-opium) fell sharply to an estimated 3.7 percent in 2013 from 14.4 percent the year before.
The bank observed political events of the last several months in Afghanistan overshadowed economic developments.
Its twice-a-year report -- South Asia Economic Focus – the bank said Afghanistan was on course for a fiscal crisis, with declining revenues leading to an unfinanced fiscal gap in 2014.
The new government, it said, would need to quickly establish itself as a cohesive and effective unit in order to address the considerable development challenges facing the country.
According to the World Bank, the new government faced the dual challenges of restoring confidence in its economic prospects and attending to a host of formidable medium-term development challenges.
“In addition to stalled growth and the fiscal crisis, the medium-term development challenges include aid dependence, job creation for 400,000 new labor-market entrants each year, high and persistent poverty, low levels of human development, and high levels of corruption,” it said.
In addition, fragility and conflict are pervasive and undermine economic prospects as well as social cohesion and stability, the report said.
The bank said economic growth is projected to pick up modestly, contingent on reduced uncertainty and reforms to restore confidence.
“The growth projections remain highly fluid. With the economy stalled in 2014, the timing and strength of any growth uptick is hostage to the political and security challenges and progress (or lack thereof) in the pace of reforms,” it said.
It noted the Afghan authorities would need to prioritise the reform process in order to restore private sector confidence so as to revive economic growth in 2015.
The bank said Afghanistan has the potential to build on its agricultural foundation that accounts for about one-quarter of GDP and is closely linked to other parts of the economy, such as food and beverages (which account for almost all of manufacturing), and parts of transport and retail.
“To restore medium-term fiscal stability, the authorities need to act immediately to improve revenue performance and direct additional resources to cover the unfinanced gap,” the bank said.
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