ISLAMABAD: The World Bank has forecast that Pakistan’s economic growth will halve to 2 percent from 4 percent for the current fiscal year, due to economic conditions and devastating floods, it reported on Wednesday. .
“Nevertheless, Pakistan faces increasing economic difficulties and Sri Lanka remains in crisis. Across all regions, improvements in living standards are expected to be slower in the half-decade to 2024 than in 2010-19,” The World Bank said in its Global Economic Prospectus released on Tuesday.
According to the report, Pakistan’s economy, with low foreign exchange reserves and large fiscal and current account deficits, was further hit by severe floods last August. About a third of the country’s area was affected, infrastructure was damaged, and about 15 percent of the population was directly affected.
Rehabilitation and reconstruction needs are expected to be 1.6 times the national development budget (Government of Pakistan) for the fiscal year 2022/23. The floods are likely to severely damage agricultural production – which accounts for 23% of GDP and 37% of employment – by disrupting current and upcoming planting seasons and pushing between 5.8 and 9 million people into poverty. Is. Policy uncertainty further complicates the economic outlook.
Pakistan, with low foreign exchange reserves and rising sovereign risk, devalued its currency by 14 percent between June and December and its country added 15 percentage points to the premium over the same period.
Pakistan’s consumer price inflation hit 24.5 percent on an annualized basis in December, its highest rate since the recent 1970s.
This is mainly due to weak growth in Pakistan, which is estimated at 2 percent in fiscal year 2022/23, half the pace expected last June. Pakistan faces difficult economic conditions, including the effects of recent floods and continued policy and political uncertainty. As the country implements policy measures to stabilize economic conditions, inflationary pressures dissipate and post-flood reconstruction begins, growth is expected.
According to an estimate, the recent floods in Pakistan have caused losses equal to about 4.8% of the GDP. Extreme weather events can exacerbate food shortages, cut off a region from essential supplies, destroy infrastructure and directly disrupt agricultural production.
Projections for Bangladesh suggest that current climate trends will reduce rice, vegetable and wheat production by 5-6 percent by 2050 compared to a no-climate change scenario. Extreme weather can also complicate the implementation of macroeconomic policies.
In India, for example, heavy monsoon rains have further destabilized food prices, destabilizing household inflation expectations, the report said. has weakened the capacity and disrupted the formulation of monetary policy.
India used its international reserves ($550 billion in November, or 16% of GDP) to limit additional exchange rate volatility in limiting rupee depreciation, and its sovereign Spreads were broadly stable at 1.4 percent in December, about the same as average levels. Five years before the pandemic.
