Country Report Pakistan
- ID: 2101420
- May 2016
- Region: Pakistan
- 25 Pages
- The Economist Intelligence Unit
South Asia will remain one of the fastest-growing regions in the world for the foreseeable future, thanks to rapidly rising consumer spending and an improving investment outlook. However, growth in the region is below potential owing to a key weakness. Relatively low levels of intra-regional trade and a failure to integrate in many global value chains have long held back investment, both domestic and foreign, as well as employment growth. Unless connectivity improves and governments within the region pursue closer integration, intra-regional trade is set to remain low, which will weigh on its economic prospects.
Policymakers in South Asia have long envied the economies of East and South-east Asia, where close intra-regional trade has helped to improve access to global value chains and provided the backdrop for investment and employment growth. By contrast, despite common historical and cultural bonds, efforts at forging closer trade and economic ties at regional level have reaped only small dividends-such as in trade facilitation and policy harmonisation-in recent years in South Asia. This is mainly owing to relatively poor infrastructure, a weak security environment in some parts of the region and mutual distrust between the major regional actors. These factors have historically constrained and will continue to temper the speed at which integration will occur.
The South Asian economies (encompassing India, Pakistan, Afghanistan, Bangladesh, Sri Lanka, Bhutan and Nepal in this context) represent a market of more than 1.7bn people. The Economist Intelligence Unit forecasts that the region will achieve rapid growth over the coming years but that its potential will still be held back by policies, which often continue to favour inward-looking growth strategies and protectionist regulation. This has often left South Asian economies not only isolated from global value chains (with notable exceptions such as textiles), but is also behind low levels of intra-regional trade. According to the Asian Development Bank, intra-regional trade accounts for a mere 5% of total trade in South Asia. SHOW LESS READ MORE >
Country Report Pakistan
Regional economic integration still a distant prospect
Political obstacles will dominate