Economic growth has slowed in FY2016-17. Yet performance has remained robust compared to regional peers. The economy sustained a supply shock related to massive flooding, a correction of the construction sector, subdued demand growth from main trade partners, and weak commodity prices.
And still, growth was firm. Favorable fiscal and monetary policies, positive investment inflows, and a wave of wide-ranging reforms intended to open and boost the economy were all helpful. Services, in particular, have continued to thrive thanks to an expansion of tourism, telecommunication, and financial services.
Going forward, growth should strengthen. A successful election in November 2015, eased sanctions from the US and an encouraging policy agenda from the new government provide a favorable environment for investment. This should, in turn, boost domestic demand.
Exports are set to pick-up gradually benefiting from a recovery in commodity prices and a gradual pick up in major trade partners’ demand. Risks stem from weak policy buffers and a difficult business environment.