In Afghanistan, the forecast for growth in gross domestic product (GDP) for Fiscal Year 2013 (ends 21 December 2014) is revised up to 3.7% because rains have been highly favorable for a second year, keeping agricultural production at last year’s high instead of falling back to trend, as assumed previously. This positive development will be partly offset by industry and services somewhat weaker than expected in April. The cause appears to be business and consumer uncertainty in view of insurgents’ stepped up attacks in connection with the 2014 full transfer of security responsibility to local forces. Private consumption is still the main source of demand but trending down.
Headline inflation reached 7.6% in June year on year, followed by a sharp rise to 9.1% in July mainly because of large price increases for foods, especially vegetables, though clothing, housing, and health costs also increased. The Afghani depreciated by about 8.8% to AF56.4 per US dollar in the first 8 months of FY2013. International reserves declined slightly in the first 5 months to $6.0 billion.
The government missed its revenue targets in the first and second quarters of FY2013, largely because customs revenues continue to fall short. As development partners increasingly channel grants and project assistance through the national budget rather than administer them on their own account, the current account balance, excluding security and partner-administered grants, is now projected at 3.4% of GDP in FY2013 (more than double the Asian Development Outlook 2013 projection), sliding to 2.8% in FY2014.
|Selected Economic Indicators (%) - Afghanistan||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||1.6||3.4||0.3||2.8|
Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
The ADO 2013 Update revises growth projections up to 3.7% in FY2013 to accommodate healthy agriculture and to 5.3% in FY2014 on the assumption that domestic demand will gather momentum as current political and security uncertainties are resolved. This could come about after the country’s presidential elections scheduled for April 2014 and the finalization, likely by the end of 2013, of an agreement on the status of forces under limited US military assistance after 2014. Inflation forecasts remain as in ADO 2013 at 6.1% in FY2013 and 5.8% in FY2014. The current account balance is now estimated higher at 3.4% of GDP in FY2013 and 2.8% in FY2014, as budget grants rise.
Source: ADB. 2013. Asian Development Outlook 2013 Update. Manila.