World Bank projects Afghanistan’s growth rate at 3.1 pc in 2016

WASHINGTON (Pajhwok): As political and security transitions led to weaker economic growth of 1.9 percent this fiscal, the World Bank on Sunday projected the growth to increase to 3.1 percent in 2016 and 3.9 percent in 2019.

The World Bank said in its latest report the political and security transitions had caused a weaker outlook during the current year when with economic growth was estimated at 1.9 percent. The growth slowed to 1.3 percent in 2014, down from 3.7 percent a year earlier.

“Fiscal vulnerabilities remain high and will require a large revenue effort and sustained levels of aid. Future prospects hinge critically on improvements in security and forceful implementation of reforms,” the bank said.

It added the medium-term outlook was unfavorable: Growth, projected at 1.9 percent, will likely remain sluggish in light of a further deterioration in security over the first three quarters of the current year.

With declining global food and fuel prices and weakening domestic demand, inflation is projected at -1.7 percent (period average) for 2015. Fiscal vulnerabilities are projected to remain high.

Revenues recovered in the first half of the year remain below the initial targets. The most recent projections indicate domestic revenues to reach 116 billion afghanis (9.9 percent of GDP) by the end of 2015, compared to the initial target of 120 billion afs.

Recurrent expenditures are likely to increase in 2015 owing to growing security costs. Substantial, additional discretionary donor grants this year — agreed under the New Development Partnership Agreement with the US — may help to balance the budget this year.

The budget could run a deficit if the government failed to meet the commitments that triggers funds under this and other budget support programmes. The weak cash reserve position at the beginning of the year exposes the budget to larger fiscal risks.

“A mild recovery is expected for 2016. Real GDP growth is projected to increase to 3.1 and 3.9 percent in 2016 and 2017 respectively, conditioned on improvements in the security environment and strong reform momentum,” the World Bank said.

The repot made clear that much higher growth rates were required to counter population growth at 2.5 percent and estimated 400,000 entrants into the labour force each year.

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