New Delhi [India], September 22 (ANI): Pakistan's economy is forecast to slow to 3.5 per cent in the financial year 2022-23 due to reasons like devastating floods and policy tightening, the Asian Development Bank (ADB) has said in its latest report.

According to the Asian Development Outlook (ADO) 2022 Update, GDP growth in Pakistan in the financial year 2021-2022 was propelled by higher private consumption and an expansion in agriculture, services and industry--particularly large-scale manufacturing. But in the financial year 2022-23--as well as climate headwinds and Pakistan's critical policy efforts--ADB's lower growth projection also reflects double-digit inflation.

A financial year, according to ADB, starts on July 1 and ends on June 30.

The economic outlook will be shaped largely by the restoration of political stability and the continued implementation of reforms under the revived International Monetary Fund programme to stabilise the economy and restore fiscal and external buffers.

According to the update, private consumption expanded by 10 per cent in the financial year 2021-2022 resulting in improved employment conditions and higher household incomes. Agriculture output rose 4.4 per cent in the financial year 2021-2022 supported by strong performances in crops and livestock. Agriculture growth is expected to moderate due to flood damage and high input costs next year, which may diminish services growth, particularly wholesale and retail trade.

ADO update also said in the financial year 2022-23, domestic demand is expected to be suppressed by fiscal adjustments and monetary tightening. It also mentioned that inflation accelerated sharply in the fourth quarter (April-June) of in the financial year 2021-2022, spurred by the removal of fuel and electricity subsidies, a significant depreciation in the rupee and the surge in international commodity prices.

Pakistan's inflation spiked to 21.3 per cent in June, its highest since 2008, lifting average headline inflation to 12.2 per cent in in the financial year 2021-2022. Inflationary pressures will remain high in the financial year 2022-23 with inflation forecast to rise to 18 per cent, the ADO update said on Thursday. In addition to the floods, the elevated inflation rate along with possible fiscal slippages as general elections approach, and a higher-than-projected increase in global food and energy prices, remain downside risks to the outlook. (ANI)