A new report by the Asian Development Bank (ADB) about the economic situation in Asia shows that the organization is not very optimistic about the economic growth in Afghanistan in the next few years.
“… your economy is growing too slowly, if you have two percent growth that you had in some years, and your population growth is three percent or higher you cannot keep people out of poverty,” said David Daniel Oldfield, ADB Principal Economist for Central and West Asia.
The report states Afghanistan’s economy will only grow by 2.5 percent in 2018 and 2019 due to challenging security and political situations in the country.
The ADB official meanwhile said security challenges, parliamentary and presidential elections and the lack of rainfall will all affect the country’s economy.
“We could see businesses are reluctant to expand their operations through increased investment as they wait to see if the security situation stabilizes and the outcomes of the elections, particularly for the presidency,” said Oldfield.
He added: “Although Afghanistan’s GDP growth is projected to be relatively slow over 2018 and 2019, progress on structural reforms under the IMF Extended Credit Facility and increasing private investment can help to boost economic activity beyond 2019 and put the country’s economy on more solid ground.”
The report shows that consumer inflation peaked at 7.5 percent year on year in May 2017 but dropped to 3.1 percent in December.
It also shows that average inflation stood at 5 percent in 2017, up from 4.4 percent in 2016, and was driven by food price inflation which averaged 7 percent.
The report however shows that considering the opening of new transit routes for Afghanistan, the country’s exports will increase in coming years.
“The Asian development outlook is one of the things we do as our knowledge works. We really talk about economy of the region and how Afghanistan fits in there. I think it is very important that we understand the dynamics of the economic situation in which we are working to improve Afghanistan’s own development,” said Samuel Tumiwa, ADB country director for Afghanistan.
According to the report, domestic investment remained steady, equal to 18.5 percent of GDP.
It shows that private investment was estimated at only 8 percent of GDP in 2017, reflecting a lack of confidence in political and security conditions.
“Afghanistan has very low private investment. It is estimated to be eight percent of GDP compared to South Asia average of 20.8 percent,” Oldfield said.
The Ministry of Economy’s spokesman Suhrab Bahman meanwhile said they are optimistic about the economy improving incoming years.
“Our economic growth was 2.6 percent in 2017, and we hope that this year the economic growth will be at least 3 percent and more than 3 percent in the coming years,” he said.
According to the report, domestic revenue collection rose by 11.2 percent to 169 billion AFs in 2017 and exceeded the target set under an International Monetary Fund Extended Credit Facility arrangement.