Islamabad: As opposed to its previous estimate of 6% in 2022, the International Monetary Fund (IMF) has revised its GDP growth rate projection for Pakistan downward from 3.5 to 2 percent for 2023.
According to the IMF’s “inflation peaking amid low growth” World Economic Outlook (WEO) Update, Pakistan’s GDP is expected to grow by 2% in 2023 and 4% in 2024. However, the IMF WEO report published in October 2022 projected Pakistan’s GDP growth rate at 3.5% for 2023 as opposed to 6% in 2022, but it omitted the effect of the floods.
The World Bank forecasts a 2% GDP growth rate for Pakistan in the fiscal year 2022–2023.
Global growth is anticipated to decline from an estimated 3.4% in 2022 to a projected 2.9% in 2023 before rising to a projected 3.1% in 2024, according to the Fund. The forecast for 2023 is 0.2 percentage points above the October 2022 WEO prediction, but it is still below the historical (2000–19) average of 3.8%. Russia’s war in Ukraine and the increase in central bank rates to combat inflation continue to have a negative impact on economic growth.
Growth in 2022 was slowed by the quick spread of Covid-19 in China, but the recent reopening has opened the door for a quicker-than-anticipated recovery. It is anticipated that global inflation will decrease from 8.8% in 2022.
Although adverse risks have abated since the October 2022 WEO, the balance of risks is still heavily skewed to the downside. On the plus side, it’s possible for pent-up demand in several economies to provide a stronger boost or for inflation to decline more quickly. The recovery may be slowed down by China’s poor health outcomes, the war in Ukraine by Russia may worsen, and debt distress may get worse due to higher global financing costs. Unfavorable inflation news could also cause financial markets to abruptly reprioritize, and further geopolitical fragmentation could impede economic growth.
It went on to say that maintaining sustained deflation remained the top priority in the majority of economies despite the crisis in the cost of living. Macro-prudential tools must be used, as tighter monetary conditions and slower growth could affect the stability of the economy’s finances and debt.
Broad-based fiscal relief measures should be discontinued, and financial assistance should be better targeted at those who are most impacted by the elevated prices of food and energy. To preserve the benefits of the rules-based multilateral system and to reduce greenhouse gas emissions and increase green investment, stronger multilateral cooperation is required.
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