Afghanistan is one of the countries whose economy is heavily dependent on the agricultural sector, which employs a large part of the population.
Rich natural resources, including oil, gas and mineral deposits, are potential growth factors, but development is constrained by vulnerability to natural disasters that reduce production in the agro-industrial complex, undeveloped infrastructure, extremely high levels of poverty, weak state institutions and ongoing conflicts.
To date, the country is still recovering from the consequences of the political crisis of 2021, which led to a significant reduction in the country's development indicators.
According to Oxford Economics, in two years the GDP indicator decreased from $19.8 billion in 2020 to $13.5 billion in 2022. The economy shrank by 23.9% in 2022, which was caused by a collapse in the financial and banking sectors, a drop in private economic activity, mass public unrest and a humanitarian crisis. Moreover, the country was cut off from assistance from international organizations, which exacerbated the problem of hunger and lack of drinking water. However, over time, assistance resumed, mainly from the UN.
Despite this, the people of Afghanistan are still not provided with sufficient supplies of food and medicine.
According to Oxford Economics forecasts, the stabilization of the situation inside the country may attract investments from some states, which, coupled with the growing volumes of UN humanitarian support, will lead to the restoration of economic growth in the medium term. It is expected that in 2023 the GDP indicator will increase by 3.9%, and by 2025 the growth may reach 11.4%. Nevertheless, there is a risk of renewed conflict within the ruling leadership, which will jeopardize the possibility of increasing foreign investment.
Rising prices for food and fuel, as well as instability within the country and a global decline in economic development caused by geopolitical tensions, led to an increase in the level of inflationary pressure to 14.6% in 2022. Food inflation primarily affects the poorest segments of the population, who, according to the United Nations Development Program (UNDP), are forced to spend about 60-70% of their income on food. Nevertheless, inflation is expected to decline in the medium term.
So, according to Oxford Economics, in 2023 the indicator will be 6.1%. The World Bank explains the stabilization of inflationary pressure by a decrease in food and energy prices, the alignment of the exchange rate of the national currency and a reduction in economic activity in winter.
