One year into the transition process,Afghanistan sustains robust economic growth. An exceptionalharvest, supported by the launch of first large-scale miningactivities, increased real gross domestic product (GDP)growth from 7.3 percent to an estimated 11.8 percent in2012. Inflation dropped to 6.4 percent and continuing highlevels of aid helped to build up further internationalreserves. The medium-term outlook is tainted by uncertainty.Political and security uncertainties are expected to limitprivate-sector growth in the coming years. Increased publicspending, however, will continue to fuel demand for servicesand construction through 2013. The transition processexposes Afghanistan to a number of serious risks, such asrising financing for public service provision. Securityconsiderations aside, promoting sources of inclusiveeconomic growth, especially agriculture, and strengtheningdomestic revenue mobilization will be important to mitigatesome of these risks. In particular, a stronger reform effortin areas such as tax policy and customs is required tosafeguard past gains in development. Finally, improvementsin the legal and regulatory environment of mining could helpto secure planned investment.
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