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- GDP (PPP):
- $64.1 billion
- 1.5% growth
- 4.4% 5-year compound annual growth
- $1,919 per capita
- Inflation (CPI):
- FDI Inflow:
Afghanistan’s economic freedom score is 51.3, making its economy the 154th freest in the 2018 Index. Its overall score has increased by 2.4 points because of notable increases in investment freedom, financial freedom, and monetary freedom and a higher property rights score. Afghanistan is ranked 38th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.
The improved availability of key economic data made it possible to grade Afghanistan’s economic freedom for the first time in the 2017 Index. The country’s score in the 2018 Index reflects dramatic improvement in several economic freedom indicators. Over the past decade, economic growth has been volatile but rapid, with construction and agriculture the key contributors to economic expansion. Political uncertainty, corruption, and security challenges remain formidable, and the rule of law remains fragile and uneven across the country.
Former World Bank technocrat Ashraf Ghani Ahmadzai became president in 2014 following an election marred by allegations of vote rigging. After much political wrangling, President Ghani and former Foreign Minister Abdullah Abdullah formed a unity government with Abdullah as chief executive officer. Afghanistan is heavily dependent on international military and economic assistance, which constituted an estimated 4 percent of GDP in 2016, and its living standards are among the lowest in the world. Legal exports include table grapes and raisins, but the economy remains heavily dependent on opium cultivation. In 2017, in an effort to stabilize the country, the United States embarked on a new policy toward Afghanistan, increasing its troop presence and coordinating regional support.
Protection of property rights is weak due to the lack of a comprehensive land titling system, disputed land titles, and the incapacity of commercial courts. The judicial system operates haphazardly, and justice in many places is administered by inadequately trained judges according to a mixture of legal codes. Corruption is endemic throughout society, and bribery demands at border crossings hamper development of a market economy.
The top income and corporate tax rates are 20 percent. The overall tax burden equals 5.0 percent of total domestic income. Over the past three years, government spending has amounted to 26.3 percent of total output (GDP), and budget deficits have averaged 1.0 percent of GDP. Public debt is equivalent to 8.3 percent of GDP. Security challenges have caused increased budgetary uncertainty and fiscal vulnerability.
Processes for establishing businesses and obtaining necessary licenses are relatively streamlined, but dealing with construction permits and obtaining electricity remain problematic. There is a critical shortage of skilled labor. Formal employment is relatively rare. Due to the severe underdevelopment of Afghanistan’s financial system, the government has very limited influence on monetary policy.
Trade is significant for Afghanistan’s economy; the combined value of exports and imports equals 56 percent of GDP. The average applied tariff rate is 7.0 percent. Nontariff barriers significantly impede trade. The government restricts investment in some sectors, and legal and security obstacles limit foreign investment. The limited capability of the underdeveloped financial sector hampers entrepreneurial growth. The banking sector remains fragile.