Afghanistan Economic Update, December 2010
 | GROWING ECONOMY
December 23, 2010 - Afghanistan’s growth outlook for 2010/11 is cautiously optimistic with GDP growth of 8.5-9%, and inflation around the government’s target of 5% assuming banking sector losses are contained.
December 2010 Update (pdf)
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RECENT ECONOMIC DEVELOPMENTS
Real GDP growth remained strong, at 22.5% in 2009/10, but volatile due to agricultural output. The driver of the economy continues to be private consumption due to high demand for goods and services from the increasing donor funding, the security economy, and an estimated external budget of around US$4 billion.
The Central Bank managed to contain non-food inflation to around 3%, from the 9% high of 2008/09, but external factors, such as the fall of Pakistani food imports due to the floods, may push food prices upward. Finally, the mining sector will grow vigorously, as the construction phase of the Aynak copper mine intensifies.
OUTLOOK
The outlook for 2010/11 is favorable, with GDP growth of 8.5-9% and inflation around the government’s target of 5% forecast. Afghanistan benefited from increased rainfall and favorable climatic conditions in 2009 that suggest 2010 will be a year of high agricultural output.
These weather conditions point to an important sector-contribution to GDP in 2010/11, at around its previous average of 5 percentage points. The services sector will continue to provide much of the growth in the upcoming year, benefiting from higher government and donor spending.
Thus, the engine of growth will remain private consumption, fueled by the increasing donor funding, the security economy, and an estimated external budget of around US$4 billion. Together, these forces will drive the demand for goods and services. The mining sector will grow vigorously, as the construction phase of the Aynak copper mine intensifies.
WORLD BANK ASSISTANCE TO AFGAHANISTAN
World Bank assistance comprises a portfolio of International Development Association (IDA) grants and credits as well as the projects it supervises on behalf of the Afghanistan Reconstruction Trust Fund (ARTF) . Since 2002, IDA has committed a total of US$2 billion in grants (77%) and credits (23%) in Afghanistan.
Thirty-six development and emergency-reconstruction projects as well as four budget-support operations have been committed to date. In addition, the ARTF has committedUS$2.2 billion for recurrent costs of government and US$1.4 billion in ARTF investments in national government programs. At end-August the active IDA portfolio was worth US$1 billion.
FY2011 is the final year of IDA 15 and the government is seeking to utilize the remaining US$245 million before July 2011.
The ARTF will be investing in a new public finance management operation, the power sector, new higher education and skills development programs as well as in ongoing national programs, such as National Solidarity Program (NSP).
ADDITIONAL RESOURCES
Afghanistan Economic Update - May 2010
In spite of the security, social, and political difficulties, Afghanistan has enjoyed mostly favorable macroeconomic conditions. Read More »
In spite of the security, social, and political difficulties, Afghanistan has enjoyed mostly favorable macroeconomic conditions. Read More »
Afghanistan: Data & Statistics
A wide range of social and economic measures on Afghanistan, including links to the World Bank's most important online development databases. Read More »
A wide range of social and economic measures on Afghanistan, including links to the World Bank's most important online development databases. Read More »
Afghanistan: Analysis and Research
Compilation of all the World Bank's publications on Afghanistan. Read More »
Compilation of all the World Bank's publications on Afghanistan. Read More »
World Bank Program in Afghanistan
Launching pad to all information on World Bank activities in Afghanistan. Read More »
Launching pad to all information on World Bank activities in Afghanistan. Read More »
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