Afghanistan Development Update, October 2015
More frequent incidences of violence in Afghanistan, as well as delays in the elections process and cabinet formation, continued to fuel uncertainty and affected investor confidence in 2014 and the first half of 2015. Economic growth slowed to 1.3...
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| Language: | English en_US |
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Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/10/25218611/afghanistan-development-update-october-2015 http://hdl.handle.net/10986/22931 |
| Summary: | More frequent incidences of violence in
Afghanistan, as well as delays in the elections process and
cabinet formation, continued to fuel uncertainty and
affected investor confidence in 2014 and the first half of
2015. Economic growth slowed to 1.3 percent in 2014, down
from 3.7 percent a year earlier. Unlike in previous years,
agriculture did not contribute much to growth in 2014.
Production levels were high for a third year in a row but
did not supersede the strong output in 2013. Growth was
mainly driven by services and a slight expansion of
industries where an increase in construction activities
outweighed lower production in manufacturing. Private
investment activities showed strong signs of slowdown in
2014, evidenced by a drop of nearly 50 percent in new firm
registrations since 2012. The National Unity Government has
embarked on an ambitious reform agenda to revitalize the
economy, tackle corruption, and improve investment climate.
However, it will take time for these reforms to have an
impact, and it is yet unclear how much they will mitigate
the high risks stemming from the fragile security
environment. Growing trends in security and pension and wage
spending over the medium term require immediate attention.
Afghanistan faces significant financing shortages for both
civilian and security spending. Therefore, securing
continued high levels of donor financing over the coming
years is of critical importance for fiscal stability in the
country. The fragile security environment and financing
constraints, compounded by weak governance capacity, pose
serious challenges to service delivery in Afghanistan. Any
setback in reform implementation would further slowdown the
pace of human capital accumulation in Afghanistan and reduce
future prospects of growth and poverty reduction. |
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