INSUBCONTINENT EXCLUSIVE:
Amid increasing uncertainty in the global economy, South Asias growth prospects have weakened, with projections downgraded in most countries
in the region, including Afghanistan.
Stepping up domestic revenue mobilization could help the region strengthen fragile fiscal positions
and increase resilience against future shocks, said the World Bank in its twice-yearly regional outlook the South Asia Development Update
which was released on Wednesday.
According to the report, in Afghanistan, despite aid cuts, the economy is estimated to have grown by 2.5
percent in FY24-25, which was slower than the pace of population growth.
Growth is forecast to increase only moderately to 2.2 percent in
2025/26, the World Bank report stated.
Coinciding with the release of the South Asia report was the World Banks Afghanistan Development
Update report which explained the situation in more detail.
Stating that while the countrys economy is gradually recovering, the outlook
remains uncertain due to growing fiscal pressures, a widening trade deficit and persistent poverty and food insecurity.
The report stated
that these factors continue to strain households and hinder inclusive growth.
However, Afghanistan recorded its second consecutive year of
growth in 2024, the World Bank stated, adding that the recovery was largely driven by the agriculture sector.
Manufacturing and services
remained subdued due to an unfavorable business environment, persistent export barriers and declining foreign aid.
Modest gains in private
consumption and real estate investment contributed to growth, the report stated, adding that rising imports widened the trade deficit,
increasing external vulnerabilities.
At the same time, rapid population growth and the return of refugees continue to strain job creation
and public service delivery, further deepening the fragility of the economy.
Deflation meanwhile persisted in 2024, with food prices having
Non-food inflation remained stable
Persistent deflation continued in 2024,
Poverty, food insecurity, and malnutrition however remained pressing challenges and despite modest
wage growth, high unemployment and restrictions on women continue to strain livelihoods, the report stated.
Early this year, 14.8 million
people faced food shortages, while acute malnutrition now affecting 4.7 million women and children is worsening
The World Bank warned that without urgent action, human capital development will be further undermined.
Fiscal pressures meanwhile remained
high as domestic revenue mobilization, though relatively strong, is insufficient to offset the sharp decline in aid.
The report also stated
that exports declined in 2024, while imports surged widening the trade deficit.
The increase in imports however was driven by rising
industrial demand and substitution of domestic consumer goods.
The afghani (AFN) currency, which had appreciated significantly in 2023 due
to strong foreign inflows stabilized with slight depreciation in 2024 but the banking sector remained fragile.
The World Bank reported that
economic growth is expected to slow to 2.2 percent in 2025 amid aid disruptions, before gradually recovering to 2.5 percent in 202627.
The
organization however warned that while Afghanistans youth remain a vital source of resilience and untapped potential, urgent action to
expand job opportunities for them is needed.
The post Afghanistans growth prospects remain uncertain amid global uncertainty: World Bank
report first appeared on TINS News.
