The conflict in Afghanistan will continue as the sharp reduction in NATO forces emboldens the Taliban insurgency and weakens the economy. Even if the conflict eventually winds down, Afghanistan will face colossal development challenges that will take at least a generation to overcome.
Afghanistan's political outlook is unlikely to see a significant improvement over the coming quarters as the Taliban continues to gain ground amid a growing Islamic State presence. While the US is likely to send additional troops to boost security, this is unlikely to have a significant impact, and the fighting also led to delays in the 2018 parliamentary elections. 0 Afghanistan continues to face considerable challenges in rebuilding its war-torn economy and the contracts it has signed with China will go some way in providing support for the development of the country's infrastructure. In addition, the improvement in the public procurement process will be positive for the business environment and reduce expenditure. We therefore forecast Afghanistan's real GDP to expand by 3.1% in FY2017/18 (April-March). However, the deteriorating security outlook poses downside risks to our forecast.