imf lowers pakistan gdp growth projection
Published on: February 3, 2024.
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ISLAMABAD: The International Monetary Fund (IMF) has revised its projection for Pakistan’s GDP growth rate for 2024, lowering it by 0.5 per cent to two per cent. This is a slight decrease from the negative 0.2 per cent projected for 2023. The IMF’s latest report, titled “World Economic Outlook Update: Moderating inflation and steady growth open path to soft landing,” also revises the GDP projection for the next fiscal year downward by 0.1 per cent to 3.5 per cent.
In its previous projection in October 2023, the IMF had estimated a GDP growth rate of 2.5 per cent for Pakistan in 2024. The revision reflects a more cautious outlook for the country’s economic performance.
On a global scale, the IMF forecasts a growth rate of 3.1 per cent in 2024 and 3.2 per cent in 2025. The 2024 forecast is 0.2 percentage points higher than the previous estimate made in October 2023. This is attributed to the strong resilience of the United States and several emerging market and developing economies, as well as fiscal support in China.
However, the projected global growth rates for 2024-25 remain below the historical average of 3.8 per cent. Factors contributing to this include high central bank policy rates to combat inflation, reduced fiscal support amidst high debt, and low productivity growth. Despite these challenges, inflation is declining faster than expected in most regions, aided by measures to address supply-side issues and restrictive monetary policies.
The IMF expects global headline inflation to decrease to 5.8 per cent in 2024 and 4.4 per cent in 2025, with a downward revision to the 2025 forecast.
The recent economic developments indicate a decrease in the likelihood of a hard landing for the global economy, with risks to growth being relatively balanced. Faster disinflation could lead to further easing of financial conditions, presenting an upside to the projections. Conversely, spikes in commodity prices due to geopolitical shocks, supply disruptions, or persistent inflation could lead to tight monetary conditions. Challenges in the Chinese property sector and potential tax hikes and spending cuts in other economies could also pose risks to growth.
According to the IMF, policymakers face the challenge of managing inflation and adjusting monetary policy accordingly. As inflation declines and economies become better equipped to handle fiscal tightening, there is a need to focus on fiscal consolidation. This includes rebuilding budgetary capacity, raising revenue for new spending priorities, and addressing public debt levels.
Implementing targeted and sequenced structural reforms can enhance productivity growth, ensure debt sustainability, and facilitate higher income levels. Improved multilateral coordination is also essential for effective debt resolution and addressing the effects of climate change.
Overall, while Pakistan’s GDP growth rate has been revised downwards, the IMF’s report highlights the importance of managing inflation, undertaking fiscal consolidation, and implementing structural reforms to foster sustainable and resilient economic growth.
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