The unity government in Afghanistan formed after presidential elections in 2014 is beset by an escalation in the insurgency that undermines its efforts to boost growth and public confidence in the wake of the 2014 withdrawal of international security forces. Growth edged up in 2015, and the outlook is for a modest pickup. Improved security, political cooperation, and donor support are required for the economy to transition to a sustainable path.
|Selected economic indicators (%) – Afghanistan||2015||2016 Forecast||2017 Forecast|
|Current Account Balance (share of GDP)||4.5||2.0||-0.7|
Source: Asian Development Outlook 2016
Growth remained slow in 2015 as deteriorating security and continuing political uncertainty sapped consumer and investor confidence. Growth in the gross domestic product (GDP) is provisionally estimated to have accelerated marginally to 1.5% from 1.3% in 2014.
On the supply side, agricultural output is estimated to have fallen by 2.0% with less favorable weather, but production has remained relatively high since the record-breaking harvest in 2012. Growth in services picked up slightly to 2.8% on marginally higher demand, while expansion in industry slipped to 1.4% as investment dropped markedly and consumers spent less on manufactured goods. ith the investment falloff, private and government consumption now appear to account for 85% of GDP.
Afghanistan experienced mild deflation in 2015, with consumer prices averaging 1.5% less than in 2014. Food prices averaged 1.9% lower and nonfood prices 1.2% lower, reflecting weak domestic demand as well as declining global prices for fuel and other commodities. Prices tended to recover after July 2015, and by December the consumer price index was 0.2% higher than in December 2014.
Economic growth is projected to accelerate slightly to 2.0% in 2016 and 3.0% in 2017, assuming that security and political conditions do not deteriorate, planned donor support holds firm, and the current positive trend of improved policy and governance reform continues.
Raising investor confidence depends on improving the security and business environment, especially for the extractive industry, and strengthening governance and the rule of law. If the government implements measures to improve governance, moderate growth in industry and services is projected to the forecast horizon. Growth in agriculture, on the other hand, is forecast to remain flat in 2016 due to unfavorable weather but likely to improve in 2017.
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