Pakistan’s economy faces significant challenges, and urgent action is required to mitigate the impact of the economic slowdown and address the structural weaknesses in the economy. The IMF’s latest assessment paints a bleak picture, and policymakers must take bold steps to ensure the country does not get left behind in the race for global economic growth. The IMF has downgraded its growth forecast for the current fiscal year to a mere 0.5%, with inflation set to soar to over 27% and unemployment reaching 7%. This is a significant decline from the Fund’s earlier projection of a growth rate of 3.5% in October, as the global economic slowdown and the devastating impact of floods have taken their toll on the economy.
Although the global headline inflation rate is expected to decrease from 8.7% to 7% in 2023, the core inflation rate, which excludes volatile energy and food components, is predicted to decline more slowly. The World Bank and the Asian Development Bank have also projected a growth rate of 0.4% and 0.6% for Pakistan this year, along with inflation rates of 29.5% and 27.5%, respectively.
The IMF’s flagship World Economic Outlook (WEO) report predicts a rise in Pakistan’s unemployment rate to 7% from 6.2% last year. While the IMF does anticipate a slight improvement in economic growth to 3.5% in fiscal 2024, this will come at the cost of elevated inflation and higher unemployment.
The current account deficit is expected to decrease to 2.3% of GDP this year from 4.6% a year ago, before marginally increasing to 2.4% next year. The IMF has revised its baseline forecast for global economic output from 3.4% to 2.8% this year, which is lower than its earlier projections of 2.9%.