world-bank-logoThe World Bank following a report on Tuesday announced that the economy of Afghanistan showed a considerable growth in 2012 and was recognized as the fastest-growing economy in south Asia.

The report “Global Economic Prospects” however warned of a reduction in economic growth for the coming three years as the Afghan security forces are taking security lead across the country.

World Bank followed the report added, “Economic growth in South Asia weakened considerably in 2012 to an estimated 5.4 percent, from 7.4 percent the previous year. Delayed monsoon rains, electricity shortages, macroeconomic imbalances including large
fiscal deficits and high inflation, and policy and security uncertainties contributed to subdued economic activity in the region, which also faced negative impacts from the Euro Area debt crisis and a weak global economy.”

The report added, “In contrast, Afghanistan’s economy grew robustly by about 11 percent mostly due to a good harvest.”

“Afghanistan is in a state of transition which involves the handover of security responsibilities from international forces to the Afghan government. This process is characterized by considerable political and security uncertainty”, the report said adding that, “However, in 2012, Afghanistan’s economy grew strongly as a result of an exceptionally good harvest.”

According to the World Bank, Real GDP growth is estimated at around 11 percent, a significant increase from 7.3 percent in 2011. The good harvest has also brought Afghanistan to near food selfsufficiency and slowed inflation to 4.6 percent in July 2012 on a year-on-year basis, although inflation edged up to 5.4 percent in September. The medium-term outlook for Afghanistan remains cautiously optimistic.

The reoprt also added, “At the Tokyo conference in July 2012, donors pledged sufficient funds to fill Afghanistan’s (civilian) financing gap (estimated at $4 billion per year on average over the next years), and this should allow the government to sustain service delivery and development gains. Nevertheless, the transition process, which is associated with a decline in military and civilian aid, and the upcoming presidential elections could further increase uncertainty in the medium term and take a toll on investor confidence. Projections suggest that even with favorable assumptions, real GDP growth may fall from the average of 10 percent per year experienced over the past decade to 4-6 percent for 2013-2015.”

The South Asian countries included in the regional estimates and forecasts include Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The text also discuses recent developments and economic prospects for Afghanistan. However, Afghanistan, Bhutan and Maldives were not included in the South Asia regional aggregates due to insufficient reliable historical data on national income accounts and balance of payments components.