WASHINGTON: The International Monetary Fund (IMF) has lowered Pakistan’s current year growth forecast from 2 percent to 0.5 percent for the current fiscal year (FY23).
The IMF said in its latest World Economic Outlook report Pakistan’s GDP is projected to be 3.5 percent in FY24 which stood at 6 percent in FY22.
Moreover, the Fund has revised upward the inflation rate projection to 27.1 percent for the current fiscal year against its earlier projection of 19.9 percent.
According to the report, consumer prices were 12.1 percent in FY22 and are projected to be 21.9 percent in FY24. Meanwhile, unemployment in the country is projected to increase to seven percent in 2023 against 6.2 percent in 2022.
The Fund trimmed its 2023 global growth outlook slightly as higher interest rates cool activity but warned that a severe flare-up of financial system turmoil could slash output to near recessionary levels.
The IMF said in its report that banking system contagion risks were contained by strong policy actions after the failures of two US regional banks and the forced merger of Credit Suisse. But the turmoil added another layer of uncertainty on top of stubbornly high inflation and spillovers from Russia’s war in Ukraine.
“With the recent increase in financial market volatility, the fog around the world economic outlook has thickened,” the IMF said as it and the World Bank launch spring meetings this week in Washington.
“Uncertainty is high and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled,” the Fund added.
The IMF is now forecasting global real GDP growth at 2.8% for 2023 and 3.0% for 2024, marking a sharp slowdown from 3.4% growth in 2022 due to tighter monetary policy.
Both the 2023 and 2024 forecasts were marked down by 0.1 percentage point from estimates issued in January, partly due to weaker performances in some larger economies as well as expectations of further monetary tightening to battle persistent inflation.
The IMF’s US outlook improved slightly, with growth in 2023 forecast at 1.6% versus 1.4% forecast in January as labor markets remain strong. But the Fund cut forecasts for some major economies including Germany, now forecast to contract 0.1% in 2023 and Japan, now forecast to grow 1.3% this year instead of 1.8% forecast in January.
The IMF raised its 2023 core inflation forecast to 5.1%, from a 4.5% prediction in January, saying it had yet to peak in many countries despite lower energy and food prices.
“Monetary policy needs to stay focused on price stability” to keep inflation expectations in check, IMF chief economist Pierre-Olivier Gourinchas told a news conference.
