IMF lowers Pakistan's economic growth forecast to 2% for current fiscal year

IMF on Pakistan economy: The International Monetary Fund (IMF) on Tuesday lowered Pakistan's economic growth forecast to two per cent for the current fiscal year, down 0.5 percentage points from its October estimate of 2.5 per cent, Dawn newspaper reported.

The global lender in its latest World Economic Outlook (WEO) report released on Tuesday, revised the next fiscal year's growth forecast to 3.5 per cent, down by 0.1 per cent. The revised growth estimates are based on the IMF's recent detailed quarterly review of Pakistan's macroeconomic position as part of the ongoing USD 3 billion Standby Arrangement (SBA), which is set to expire in March.

The IMF's growth forecast is significantly lower than the Pakistan government's 3.5 per cent GDP growth target for the current year but generally in line with the State Bank of Pakistan's expectation of 2 per cent to 3 per cent announced a day earlier as part of the monetary policy statement.

The IMF in the WEO report, raised the global growth rate for 2024 to 3.1 per cent, 0.2 per cent higher than its October forecast of 2.9 per cent, citing greater than expected resilience in both the United States and China, besides many other large emerging market and developing economies, according to Dawn.

It said: "Global growth is projected at 3.1 per cent in 2024 and 3.2 per cent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 WEO on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China."

The global lender noted that the growth forecast for both years (2024 and 2025) was below the historical (2000-19) average of 3.8 per cent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.

Inflation is falling faster than expected in most regions in the midst of unwinding supply-side issues and restrictive monetary policy. "Global headline inflation is expected to fall to 5.8 per cent in 2024 and to 4.4 per cent in 2025, with the 2025 forecast revised down," it said, as per Dawn.