Industrial production and servicesgrowth remained resilient. Inflation has accelerated,primarily due to supply shocks. Monetary policy has beenaccommodative. Financial sector vulnerability is rising.With a tightening of prudential controls, lending rates areback to double digits. Despite significant recovery in bothexports and remittances, the current account deficit widenedsharply, driven by a surge in imports. The overall balanceof payments swung into deficit for the first time sinceFY11. Consequently, the exchange rate has depreciated.Interventions to smoothen exchange rate adjustments haveeroded foreign exchange reserves. The fiscal deficit hasbeen contained as weak revenue growth was counterbalanced byeven weaker growth in expenditures. GDP growth is projectedin the 6.5-7 percent range in the medium-term, while macrostability will require heightened vigilance. Povertyreduction has continued but slowed. The amount of povertyreduction achieved by each percent of growth fell by athird. Extreme poverty is projected to fall modestly to11-12 percent in the medium-term. Downside risks center onthe solvency of banks and the run-up to elections elevatinginstability and policy uncertainty. Going forward,investment and innovation enabling reforms will be key toaccelerating development progress.
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