世界发展银行-Afghanistan-Development-Update,-January-2020-_-Navigating-a-Sea-of-Uncertainty_46页_1mb

Afghanistan Development Update - January 2020 Summary

Core Content

This document provides a comprehensive overview of Afghanistan's economic developments and medium-term outlook as of January 2020. It highlights the impact of political and security uncertainties, the state of the real and financial sectors, and the broader implications for the country's fiscal and external balance.

Main Points

Political and Security Context

• Political Uncertainty: The 2019 presidential elections were marked by violence and contested results, raising the possibility of a second round.
• Civilian Casualties: Civilian casualties increased in 2019, reaching 8,239 (2,563 deaths and 5,676 injured), with most violence attributed to anti-government elements.
• Displacement: The number of internally displaced persons (IDPs) rose to over 399,000 by early December 2019, and 505,000 refugees returned to Afghanistan, mainly from Iran.
• Security Negotiations: Peace talks with the Taliban resumed after a suspension, but the political settlement remains uncertain. International security and civilian aid pledges are set to expire in 2020, increasing uncertainty.

Real Sector Activity

• GDP Growth: Real GDP growth in 2019 was estimated at 2.9%, driven by improved agricultural conditions and a slight recovery from drought.
• Agricultural Growth: The agriculture sector grew by 7.5%, with cereals up 16.6% and fruits up 5% compared to 2018.
• Industry and Services: Growth in industry and services remained weak, at 2% and 1.8% respectively, due to low private sector confidence.
• Poverty: Despite agricultural growth, poverty remains high, with 55% of Afghans living below the basic-needs poverty line. Impacts on rural livelihoods were uneven due to continued displacement and unreliable water access.

Monetary and Financial Sector

• Money Supply: Broad money supply grew only slightly to 3.9% in November 2019, reflecting a weak economic environment.
• Bank Deposits: Bank deposits declined by 4.6% in November, mainly due to a drop in foreign currency deposits.
• Private Sector Credit: Private sector credit contracted by 4% in November, with foreign currency loans decreasing significantly.
• Banking Sector Resilience: The central bank (Da Afghanistan Bank) introduced measures to strengthen the banking sector, including monitoring weak banks and de-licensing two foreign branches.
• Financial Soundness: Capital adequacy remained above thresholds, but non-performing loans (NPLs) increased to 14% of total loans. Profitability indicators improved slightly but remained weak.

External Sector

• Trade Deficit: The trade deficit narrowed to 32.3% of GDP in 2019 from 33% in 2018, due to a sharp decline in imports (8.2% y-o-y).
• Exports: Export growth slowed, with a 5.4% decline in the first nine months of 2019, driven by trade tensions with Pakistan and economic slowdown in Iran.
• Exchange Rate: The Afghani appreciated against the Pakistani Rupee and Iranian Toman but depreciated by 3.1% against the US dollar.

Fiscal Sector

• Revenue Growth: Domestic revenues reached Afs 208.5 billion in 2019, meeting mid-year targets, partly due to one-off revenues like central bank profits.
• Fiscal Deficit: The fiscal deficit was Afs 14.8 billion or 1% of GDP in 2019. It is expected to increase in 2020 as grants decline and expenditures rise.
• Development Budget: The development budget execution rate reached 92% in 2019, despite precautionary cash management measures.

Key Messages

• Economic Recovery: Growth in 2019 was modest, driven by agricultural recovery and improved weather conditions.
• Inflation: Inflation remained relatively low at 2.3% in 2019, with food prices rising slightly due to global grain prices and non-food prices declining due to lower energy prices.
• Trade Balance: The trade deficit is expected to widen in the medium term, with imports growing at the pace of economic expansion and exports struggling.
• Aid Dependency: The economy remains heavily reliant on international aid, which is projected to decline over the next few years.
• Private Sector Confidence: Weak private sector confidence continues due to political instability, security concerns, and uncertainty over aid levels.

Medium-Term Outlook

• Growth Projection: Growth is expected to remain modest at 3.3% in 2020 and stabilize around 4% in the medium term if political stability and security improve.
• Inflation: Inflation is projected to rise to 3.5% in 2020 and stabilize around 5% over the medium term.
• Fiscal Deficit: The fiscal deficit is expected to increase as aid flows decline and expenditures rise, with potential reliance on domestic borrowing and concessional loans.
• Current Account: The current account is projected to move into deficit by 2023, with international reserves declining but remaining at comfortable levels (around 11 months of import cover).

Risks and Prospects

• Downside Risks: Continued political instability, security deterioration, and premature aid reduction pose significant risks to growth and investment.
• Upside Potential: A political settlement with the Taliban could improve security and boost growth and private investment.
• Reform Priorities: Short-term reforms should focus on improving the business environment and anti-corruption measures to boost private sector confidence. Medium-term efforts should target attracting investment in agriculture and extractive industries to enhance employment and growth.

Conclusion

Afghanistan's economy is navigating a complex and uncertain environment, with political instability and security challenges continuing to constrain growth and investment. While the agriculture sector has shown resilience and growth, the overall economic performance remains modest. The country's fiscal performance has been strong, but future growth will depend on sustained international support and improved macroeconomic management. The outlook for the external balance is mixed, with a narrowing trade deficit in 2019 but potential widening in the medium term. Continued reform efforts and investment in key sectors are essential to ensure sustainable economic development.