Floods may affect next crop season: ADB

ISLAMABAD:

The Asian Development Bank (ADB) on Wednesday predicted that the devastating floods in Pakistan that began in mid-June might threaten the upcoming agricultural season too as wheat was usually planted from mid-October.

In a report titled “Asian Development Outlook 2022 Supplement”, the ADB noted that the country's outlook for the fiscal year 2023 – ending on the 30th of June next year – had deteriorated under heavy flooding.

“[Pakistan’s] economy was already struggling to regain macroeconomic and fiscal stability before the floods, which have adversely affected cotton, rice, and other important crops,” it observed.

The report also noted that the flooding was expected to have spillover effects on the country's industry, “notably textiles and food processing, and on services, in particular wholesale trade and transportation”.

It added that flood disruption and damage were expected to slow Real GDP growth of Pakistan in combination with a tight monetary stance, high inflation, and an unconducive global environment.

The ADB noted that the floods had dampened the country’s economic activity -- already affected by stabilisation efforts to tackle sizable fiscal and external imbalances and double-digit inflation.

It further noted that the FY2023 forecast for Pakistan was revised up to reflect a weaker currency; higher domestic energy prices; and flood-related crop and livestock losses and supply disruption.

It added that these factors had caused transitory food shortages and price spikes.

According to the report, transportation difficulties have exacerbated these shortages and disrupted other domestic supply chains, broadening inflationary pressures and imposing production challenges.

The ADB report read that South Asia was on track to meet the growth forecast of 6.5% in 2022 but the forecast for 2023 had been downgraded slightly from 6.5% to 6.3%.

It added that sub-regional revision for 2023 largely reflected lower forecasts for Bangladesh and Pakistan.

Recovery in Bangladesh was also “hampered by external imbalances and unexpectedly high inflation”, it stated.

It predicted inflation in South Asia – comprising Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka – to increase from 8.1% in September to 8.2% in December.

However, the inflation statistics for the year 2023 had a more substantial increment from 7.4% to 7.9%.

The ADB noted that the sub-regional revision for 2023 largely reflected higher inflation forecasts for Bangladesh, Nepal, Pakistan and Sri Lanka.

Inflation forecasts for elsewhere in the sub-region in 2023 remained unchanged while inflation in India was expected to rise to 6.7% before falling back to 5.8% in the fiscal year 2022.