The International Monetary Fund (IMF) on Tuesday retained its forecast of 2.5 percent GDP growth in Pakistan for the ongoing fiscal year, less than the 3.5 percent estimated by the government but above the 1.7 percent forecast by the World Bank last week.
The global lender’s World Economic Outlook report for October stated that it expected Pakistan’s economy to grow by 5 percent in the next fiscal year. However, it questioned the government’s claim of 0.3% growth in the last fiscal year, positing an economic contraction of 0.5% instead.
The IMF also revised an earlier projection of inflation for the ongoing fiscal year from 25.9 percent to an average of 23.5 percent, adding that the year-end inflation in June 2024 could decline to 17.5 percent based on the latest data. It similarly revised the current account deficit (CAD) from 1.2% of GDP to 0.7% during the ongoing fiscal year, but retained its previous projection of the CAD coming in at 1.8% for the next fiscal and 1.7% by the 2027-28 fiscal year.
The lender, meanwhile, estimated that Pakistan’s unemployment rate would rise to 8.5% in the ongoing fiscal year, up from 6.2% in the last fiscal year. For the next fiscal year, the unemployment rate has been projected at 8%.
Global economy
The IMF report projected global growth to slow down from 3.5% in 2022 to 3% this year, adding it would further reduce to 2.9% next year. “This remains well below the historical average,” it said, citing the slow gains following the impact of the COVID-19 pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. However, it said, headline inflation was continuing to decelerate from 9.2% in 2022 to 5.9% this year, with estimates it would further slow down to 4.8% next year.
The report has also projected core inflation, excluding food and energy prices, to decline to 4.5% in the next fiscal year. It said “important divergences” were becoming apparent, with the slowdown more pronounced in advanced economies than emerging markets and developing ones. This, it said, was linked to an almost complete recovery in services; the slowdown being motivated by tighter monetary policy necessary to reduce inflation; and inflation and activity being determined by last year’s commodity price shock.
The IMF also retained its global economy forecast for the ongoing fiscal year, but warned inflation remains high and the outlooks for China and Germany had been downgraded.