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%.
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.
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