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Afghanistan faces 'grim' economic outlook as pandemic wipes out growth: World Bank

KABUL (Reuters) - The coronavirus pandemic is expected to severely weaken Afghanistan’s economy, the World Bank said on Wednesday, as donor governments struggle themselves and uncertainty over peace talks curb private investment.

The World Bank said it was forecasting gross domestic product to contract between 5.5% and 7.4% in 2020, compared with growth of 2.9% in 2019, with more than 70% of the population expected to slip under the poverty line.

“COVID-19 has hit Afghanistan in the midst of a difficult political transition, an intensifying conflict, and significant uncertainty regarding future grant support,” Henry Kerali, World Bank Afghanistan director, told reporters.

Due to the lockdown, domestic government revenue is expected to fall up to 30% at a time when the economists and diplomats say Afghanistan is facing a likely fall in foreign funding as countries deal with their own economic crises at home and the United States withdraws troops and attempts to usher peace talks between the insurgent Taliban and the Afghan government.

With few options to borrow and investment stalled by years conflict, the government is heavily reliant on foreign aid. Pledges made by foreign donors in 2016 run out this year, with a conference to renew pledges due in November.

“Without progress towards a sustainable peace and commitments to continued grant support from international partners, medium-term prospects appear increasingly grim,” the World Bank said.

Ministry of Finance spokesman Shamroz Khan Masjedi said the government was concerned about the impact of COVID-19 on the economy.

“There will be more unemployment, more poverty and reduction in government revenue because many business and economic activities ... have stopped,” he said.

Reporting by Abdul Qadir Sediqi and Charlotte Greenfield; Editing by Alison Williams

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