Warning of another global recession, the World Bank on Tuesday forecast Pakis\u00adtan\u2019s economic growth to slow further to two per cent during the current year \u2014 down by two percentage points from its June 2022 estimate \u2014 because of the devastating floods and slowdown in global growth rate.
\nThe World Bank\u2019s latest forecast also points to a \u201csharp, long-lasting slowdown\u201d with global growth pegged at 1.7pc this year, compared to 3pc it predicted in June, said the bank\u2019s latest Global Economic Prospects report, a flagship publication of the World Bank Group.
\nIt said that global growth was slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia\u2019s invasion of Ukraine.
\nIn the report, the Washington-based lending agency said Pakistan\u2019s economic output was not only declining itself but also bringing down the regional growth rate. It forecast Pakistan\u2019s GDP growth rate to improve to 3.2pc in 2024, but that too would be lower than the earlier estimate of 4.2pc.
\n\u201cPolicy uncertainty further complicates the economic outlook\u201d of Pakistan, in addition to flood damages and the resultant increase in poverty, the bank said, explaining that an already precarious economic situation in Pakistan, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated in August last year by severe flooding, which cost many lives.
\nAbout one-third of the country\u2019s land area was affected, damaging infrastructure, and directly affecting about 15pc of the population.
\n\u201cRecovery and reconstruction needs are expected to be 1.6 times the FY2022-23 national development budget,\u201d it said, adding that the flooding is likely to seriously damage agricultural production \u2014 which accounts for 23pc of GDP and 37pc of employment \u2014 disrupting the current and upcoming planting seasons and pushing 5.8 million at 9m people into poverty.
\nPakistan, with low foreign exchange reserves and rising sovereign risk, saw its currency depreciate by 14pc between June and December and its country risk premium rise by 15 percentage points over the same period.
\nPakistan\u2019s consumer price inflation reached 24.5pc in December on an annual basis, recently coming off its highest rate since the 1970s, the World Bank said.
\nThe South Asian region is anticipated to grow by 5.5pc and 5.8pc in 2023 and 2024, respectively \u2014 slightly 0.3pc to 0.7pc lower than earlier estimates \u2014 mainly because of supporting 6.6pc and 6.1pc GDP growth in India. \u201cThis pace reflects still robust growth in India, Maldives, and Nepal, offsetting the effects of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka. The deteriorating global environment, however, will weigh on investment in the region,\u201d the report said.
\nIn the region excluding India, growth in 2023 and 2024 \u2014 at 3.6pc and 4.6pc, respectively \u2014 is expected to underperform its average pre-pandemic rate. This is mainly due to weak growth in Pakistan, which is projected at 2pc in FY2022-23, half the pace that was anticipated in June last year.
\nPakistan faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty. As the country implements policy measures to stabilise macroeconomic conditions, inflationary pressures dissipate, and rebuilding begins following the floods, and growth is expected to pick up to 3.2pc in FY2023-24 \u2014 still below previous projections.
\nFood prices have risen rapidly in South Asia, especially in Pakistan and Sri Lanka, increasing the incidence of food insecurity in the region.
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