The World Bank cut its economic growth forecast for Pakistan by almost one per cent, citing last ditch energy subsidies by the outgoing government.
“GDP growth is expected to slow to 4.3pc in FY22 (against 5.6pc last year) and to 4pc in FY23,” the WB said in its report.
The Washington-based lender also asked Pakistan to immediately withdraw energy subsidies, terming these “unsustainable and ineffective”.
However thereafter, economic growth is projected to recover to 4.2 percent in FY24, supported by the implementation of structural reforms to support macroeconomic stability and dissipating global inflationary pressures, the World Bank noted in its report, ‘the latest South Asia Economic Focus Reshaping Norms: A New Way Forward’.
The reported noted that countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation, increasing fiscal deficits, and deteriorating current account balances.
“South Asia has faced multiple shocks in the past two years, including the scarring effects of the COVID-19 pandemic. High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes,” said Hartwig Schafer, World Bank Vice President for South Asia.
“Given these challenges, governments need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, while laying the foundation for green, resilient and inclusive growth.”
The bank also noted that inflation is expected to rise in all countries in 2022 and reach double digits in Pakistan and Sri Lanka before subsiding in 2023.