IMF downgrades Pakistan's GDP growth forecast to 0.5% for FY23

April 12, 2023 (MLN): The International Monetary Fund (IMF) has reduced Pakistan's estimated real GDP growth rate for the current fiscal year from 2% to 0.5% due to the country's challenging economic circumstances, according to the World Economic Outlook (WEO) issued by the fund on Tuesday.

However, the country’s GDP growth rate will increase to 3.5% by the fiscal year 2024. In its previous report released in January, the IMF had lowered the growth forecast from 3.5% to 2%.

On the inflation front, the Consumer Price Index (CPI) is expected to reflect an inflation rate of approximately 27.1% during FY23, which is projected to decrease to 21.9% by FY24.

The IMF report also predicted that the current account deficit (CAD) for Pakistan would be 2.3% and 2.4% in FY23 and FY24, respectively.

It is pertinent to mention that the country’s growth will likely remain sluggish this year, with all major international financial institutions forecasting a rate below 1%.

According to the Asian Development Bank (ADB), the country's economy is expected to expand by 0.6% in 2023, slightly higher than the estimates of the IMF and the World Bank (WB), which projected growth rates of 0.5% and 0.4, respectively.

Global Outlook:

The report unveiled that global growth will bottom out at 2.8% this year before rising modestly to 3% in 2024. Global inflation will decrease, although more slowly than initially anticipated, from 8.7% in 2022 to 7% this year and 4.9% in 2024.

“On the surface, the global economy appears poised for a gradual recovery from the powerful blows of the pandemic and of Russia’s unprovoked war on Ukraine,” it read.

China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding, it added.

Simultaneously, the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back toward its targets.

Notably, emerging markets and developing economies are already powering ahead in many cases, with growth rates (fourth quarter over fourth quarter) jumping from 2.8% in 2022 to 4.5% this year.

 The slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom, where growth (also fourth quarter over fourth quarter) is expected to fall to 0.7% and –0.4%, respectively, this year before rebounding to 1.8% and 2% in 2024, it noted.

Copyright Mettis Link News