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Afghanistan Country Risk Report 2019

Afghanistan Country Risk Report 2019

The conflict in Afghanistan will continue, as the reduced NATO presence 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 domestic political outlook will remain turbulent over the coming quarters as the government, the Taliban and Islamic State compete with each other to gain territorial control, resulting in widespread civilian casualties. The upcoming presidential elections on September 28 will also generate significant volatility, given the strong challenge that incumbent President Ashraf Ghani will be facing.

We believe that Afghanistan's economy will face considerable headwinds over the coming years from a precarious security outlook, policy uncertainty caused by the upcoming elections, and a poor infrastructure network. We are therefore forecasting real GDP to expand by around 3.0% annually between FY2019/20 (March-March) and FY2021/22, considerably below than the long-term average of 5.5%.

Key Risks

Afghanistan is in a highly precarious position, meaning that there are strong downside risks to our forecasts, especially if the central government is unable to exert its authority over the provinces. These risks include policy paralysis by a divided government, and a surge in militant activity once most foreign troops are gone.

Upside risks include a faster-than-expected move towards a domestic political settlement between warring factions once foreign troops leave, and a greater willingness on the part of China, India, and Russia to shore up the Afghan government in the absence of the US and NATO.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Growth Outlook To Be Constrained By Rising Political Risks
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT FINAL CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: MAIN IMPORTS AND EXPORTS
TABLE: MAIN IMPORT AND EXPORT PARTNERS
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Long-Term Economic Outlook
Long-Term Slowdown, But Upside Surprises Possible With China's Support
TABLE: LONG-TERM MACROECONOMIC FORECASTS
TABLE: PRODUCTION OF MINERAL COMMODITIES (1)
Political Outlook
Domestic Politics
Presidential Elections And Peace Talks To Dominate Rest Of 2019
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Afghanistan Country Risk 2019ContentsLong-Term Political Outlook
Colossal Challenges, Even Without War
Demographic Outlook
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Global Macro Outlook
Global Growth Deceleration, But Policy Increasingly Supportive
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: AFGHANISTAN – MACROECONOMIC DATA & FORECASTS

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