ISLAMABAD: The International Monetary Fund (IMF) has reduced the GDP growth rate for Pakistan to 2 percent from 3.5 percent for the fiscal year 2023.
According to the IMF’s World Economic Outlook (WEO) released on Tuesday, the country’s GDP growth rate will pick up to 4.4 percent in the next fiscal year 2023-24.
The forecast from the Washington-based lender, which has been in talks with Pakistan for months over reviving a stalled loan program, is similar to that of the World Bank earlier this month.
In its report titled “Global Economic Prospects” released on January 12, the WB has forecast Pakistan’s economic growth to halve from 4 percent to 2 percent for the current fiscal year. Due to dangerous economic situation and catastrophic floods.
Global outlook
In its latest report, the IMF cited “surprisingly resilient” demand in the U.S. and Europe, easing energy costs after Beijing lifted strict COVID-19 restrictions and the reopening of China’s economy. has slightly raised the global growth outlook to 2023.
It said growth would still fall to 2.9 percent in 2023 from 3.4 percent in 2022, but its latest World Economic Outlook forecast indicated an improvement from the 2.7 percent growth forecast in October this year. The world can easily fall into recession.
For 2024, the IMF said global growth would accelerate slightly to 3.1 percent, but that’s a tenth of a percentage point lower than the October forecast as the full effect of central bank interest rate hikes dampens demand.
IMF Chief Economist Pierre-Olivier Gorenchas said recession risks had receded and central banks were making progress in controlling inflation, but more needed to be done to contain inflation and in Ukraine. A further escalation of the war and China’s fight against Covid-19 could bring new obstacles. .
“We have to be prepared to expect the unexpected, but this could represent a turning point, with growth coming down and then inflation,” Gornchas told reporters of the 2023 outlook. Declining.”
Strong demand
In its 2023 GDP forecasts, the IMF said it now expects US GDP growth of 1.4 percent, up from 1.0 percent forecast in October, and 2.0 percent growth in 2022. After It cited stronger-than-expected consumption and investment in the third quarter of 2022. , a strong labor market and strong consumer balance sheets.
It said the eurozone had made similar gains, forecasting growth of 0.7 percent for the bloc in 2023, up from 0.5 percent in the October outlook, and 3.5 percent in 2022. After addition. Expected, and softening energy prices have helped the region.
Britain was the only major advanced economy forecast by the IMF to be in recession this year, with GDP falling 0.6% as households struggle with rising living costs, including energy and mortgages.
China reopened.
The IMF revised China’s growth forecast for 2023 to 5.2 percent from 4.4 percent in the October forecast, pushing China’s growth to 3.0 percent in 2022 following “zero-COVID” lockdown policies. percent, which is below the global average for the first time. Over 40 years. But for the Chinese people, the renewed mobility boost would be short-lived.
The fund added that China’s growth rate will fall to 4.5 percent in 2024 and fall to less than 4 percent over the medium term amid slowing business dynamics and slow progress on structural reforms.
At the same time, India’s outlook remains strong, with growth unchanged at 6.1 percent in 2023 but a return to 6.8 percent in 2024, matching its 2022 performance.
Together, the two Asian powerhouse economies will account for more than 50 percent of global growth in 2023, Gornchas said.
He acknowledged that China’s reopening will put some upward pressure on commodity prices, but “on balance, I think we see China’s reopening as a benefit to the global economy.” Because it will help ease the productivity bottlenecks that have fueled inflationary demand from Chinese households.
Even with China reopening, the IMF is predicting that oil prices will fall in both 2023 and 2024 due to lower global growth than in 2022.
Risks, up and down
The IMF said there were both upside and downside risks to the outlook, with built-up savings, particularly for tourism, and easing labor market pressures in some advanced economies, helping to cool inflation. To do this, in reducing the need, there is the possibility of a continuous increase in demand. increase the offensive rate.
But he counted on more downside risks, including a more widespread COVID-19 outbreak in China and a deterioration in the country’s real estate boom.
The fund said an escalation of the war in Ukraine could push up energy and food prices further, as would next year’s cold winter as Europe struggles to replenish gas reserves and liquefied natural gas. Competing with China for supplies.
While headline inflation has eased in many countries, a premature easing of fiscal conditions leaves markets vulnerable to sudden repricing if core inflation readings fail to come down.
Core inflation may be peaking in some countries, such as the United States, but central banks need to be more vigilant and more confident that inflation is on the way down, especially in those countries, Gornchas said. In places where real interest rates are low, such as in Europe.
“So we’re just saying, look, bring monetary policy slightly above neutral and keep it there. And then assess what’s going on with price dynamics and how the economy reacts, and to adjust. There will be plenty of time. Course, so that we avoid being too strict,” said Gornchas.
