July 11, 2023 (MLN): Pakistan's likelihood of entering a recession is 62%, a recent survey conducted by Bloomberg among seven economists unveiled.
The economists' projections subjected Pakistan's economic outlook to meticulous scrutiny.
When questioned about the likelihood of a recession occurring in the next 12 months, the median estimate from a panel of 5 economists who responded put the odds at 62%.
A median of seven economists provided the following forecasts for Pakistan's several key economic indicators as surveyed by Bloomberg from July 04 to July 07.
Gross Domestic Product (GDP) Year-on-Year (YoY%) growth projections showed a mixed picture. The average estimate for 2024 shows a substantial growth forecast of 3.5%.
However, the economists' previous survey results indicate a contraction in GDP YoY% during the period, as earlier forecasted at 4% and 3.8% growth in 2024 and 2025. These diverging forecasts underscore the uncertainties surrounding Pakistan's economic performance.
Inflation, as measured by the Consumer Price Index (CPI) YoY%, is expected to cool down from current heights.
The economists' median estimate for the first quarter of 2024 is 15.4%, projecting a gradual decline in inflation over time, with forecasts of 11% in the second quarter of 2024 and a notable drop to 10.4% by 2025.
The current account balance as a percentage of GDP is anticipated to improve slightly, with a forecasted deficit of -2% by the fourth quarter of 2024 and -2.5% by 2025. These figures highlight the need for policy measures to address the country's trade imbalances.
Fiscal management is another area of concern. The economists project a budget deficit as a percentage of GDP of gradually decreasing to -6.5% average in 2024 and -5.5% by 2025.
Monetary Policy
Regarding monetary policy, the Central Bank Rate according to the economists’ forecast is expected to experience a gradual decline over time, with expectations of a 17% average in 2024 and a further decrease to 15.5% by 2025.
This indicates the central bank's intention to stimulate economic activity through reduced borrowing costs.
The Target Policy Rate, which influences borrowing costs for commercial banks, is projected to follow a similar pattern.
The economists' median estimates foresee a reduction from 22% in the fourth quarter of 2023 to 14.5% by 2025. These potential interest rate cuts aim to promote investment and stimulate economic growth.
| 3Q 2023 | 4Q 2023 | 1Q 2024 | 2Q 2024 | Avg. 2023 | Avg. 2024 | Avg. 2025 | |
|---|---|---|---|---|---|---|---|
| GDP YOY% | n/a | n/a | n/a | n/a | 0.30% | 3.50% | 3.60% |
| Previous survey | n/a | n/a | n/a | n/a | -0.30% | 4.00% | 3.80% |
| CPI YOY% | 25.00% | 21.40% | 15.40% | 11.00% | 29.00% | 18.30% | 10.40% |
| Previous survey | 24.40% | 20.50% | 14.70% | 11.50% | 28.00% | 12.90% | 7.70% |
| Current Acct. % GDP | n/a | n/a | n/a | n/a | -1.30% | -2.00% | -2.50% |
| Previous survey | n/a | n/a | n/a | n/a | -2.20% | -2.10% | -2.00% |
| Budget as a % GDP | n/a | n/a | n/a | n/a | -7.00% | -6.50% | -5.50% |
| Previous survey | n/a | n/a | n/a | n/a | -7.10% | -6.30% | -6.00% |
| 3Q 2023 | 4Q 2023 | 1Q 2024 | 2Q 2024 | Avg. 2023 | Avg. 2024 | Avg. 2025 | |
| Central Bank Rate | 23.00% | 23.00% | 20.70% | 17.00% | 17.00% | 17.00% | 15.50% |
| Target Policy Rate | 22.00% | 22.00% | 19.85% | 16.50% | 15.50% | 14.50% | 13.25% |
| Previous survey | 21.00% | 21.00% | 18.00% | 17.50% | 16.00% | 14.00% | 12.00% |
| 3-Month Interbank | 22.80% | 22.63% | 20.83% | 16.55% | 14.02% | 12.93% | 12.80% |
| 10-Year Bond | 15.50% | 15.32% | 15.32% | 14.63% | 14.00% | 14.00% | 14.00% |
NOTE: All figures are expressed as of the end of the quarter except for GDP.
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Posted on: 2023-07-11T10:58:58+05:00
