The World Bank has noted that Pakistan’s economic growth would remain lowest in the region as it is expected to remain at 3.8 per cent in fiscal year 2012-2013 that would be lower than that of India, Sri Lanka, Bangladesh and even Nepal.

The World Bank report, “Global Economic Prospects January 2013”, revealed that Pakistan’s economic growth is estimated at 3.8 per cent, which is lower than the government’s target of 4.2 per cent, during the ongoing financial year. Meanwhile, economic growth of India, the region’s largest economy, is projected at 5.4 per cent. Bangladesh’s growth is projected at 5.8 per cent, Sri Lanka’s GDP growth is estimated at 6.1 per cent and Nepal’s growth at 3.8 per cent in 2012-2013. Afghanistan’s economy grew robustly by about 11 per cent.

According to the report, Pakistan’s GDP growth is projected to remain broadly stable at 3.8 per cent in the 2012-13 fiscal year after remaining 3.7 per cent in 2011-12. Growth is projected to remain close to 4 per cent during 2014 and 2015, a relatively sluggish pace compared to regional peers.

Weak investment climate, infrastructure gaps, sovereign creditworthiness concerns, and large fiscal deficits continue to pose obstacles to a sustained improvement in investment activity and economic performance. Electricity and gas shortages for the industrial and agricultural sectors, macroeconomic challenges including fiscal deficits and high inflation, and security uncertainties, have hampered productive business activities. Mainly as a result of adverse domestic factors, investment as a share of GDP fell by nearly a third between the 2007-08 and 2011-12 fiscal years, contributing to Pakistan’s current lackluster growth potential, especially compared with the more than 6 per cent average annual GDP growth recorded between 2003 and 2007.

This secular decline in investment, unless reversed through sustained improvements in macroeconomic performance and policy credibility as well as addressing infrastructure gaps, has negative implications for productive capacity and potential output growth during the forecast horizon. Concerted efforts to address electricity shortages, a major constraint to growth, would also help to raise the sustainable pace of growth.

According to the report, economic growth in South Asia weakened considerably in 2012 to an estimated 5.4 percent, from 7.4 percent of the previous year. Delayed monsoon rains, electricity shortages, macroeconomic imbalances including large fiscal deficits and high inflation, and policy and security uncertainties contributed to subdued economic activity in the region, which also faced negative impacts from the Euro area debt crisis and a weak global economy.