IMF lowers Pakistan’s GDP forecast to 2.5pc

ISLAMABAD: The International Monetary Fund (IMF) has lowered the GDP growth projection and elevated the inflationary figures for Pakistan, indicating that stagflation is going to persist during the current fiscal year 2023-24.

The IMF, in its World Economic Outlook for 2023-24, on Tuesday lowered the GDP growth rate, which is estimated to stand at 2.5 percent for the current fiscal year against an official projection of 3.5 percent for FY2024.

Amid the persistence of stagflation, the unemployment rate is going to remain high in Pakistan whereby the ratio of unemployed people is projected to stand at 8 percent in FY2024 against 8.5 percent in FY2023. The unemployment rate stood at 6.2 percent in FY2022. The IMF’s data shows that the unemployment rate has gone up in the last two years. The World Economic Outlook for 2023-24 also projected that the GDP growth rate turned into negative -0.5 percent in the last financial year 2022-23 under the PDM-led regime but then the government gave a provisional growth rate of 0.29 percent for the previous fiscal year. The IMF has projected that the country’s GDP growth rate might rise to 5 percent by FY2028.

Under the IMF programme, the caretaker government is all set to release the quarterly GDP growth figures under the $3 billion SBA programme by the end of November 2023, so the finalized GDP growth figure would be turned into negative for the last financial year.

However, the CPI-based inflation-related projection would be elevated and estimated at 23.6 percent against an official projection of 21.9 percent for the ongoing financial year. The combination of a low growth rate and higher inflation is a recipe for stagflation whereby poverty and unemployment are going to persist, raising fears that the vulnerable segments of society might plunge into the trap of severe poverty.

The CPI-based inflation was lowered by the IMF’s World Economic Outlook; it is projected at 23.6 percent for the current fiscal against an earlier projection of 25.9 percent by the IMF staff in the IMF report released last July 2023.

The most worrying indicators for Pakistan’s economy will be related to the persistence of the current account deficit in the range of -1.8 percent of GDP for the current financial year 2023-24 against -0.7 percent of GDP in the last financial year 2022-23.