IMF projects Pakistan’s growth rate at 1.5pc for current financial year

ISLAMABAD – The International Monetary Fund (IMF) has projected Pakistan’s GDP growth rate at 1.5 per cent in the ongoing financial year.

The growth rate would increase to 4 per cent in next fiscal year. Pakistan’s growth had contracted by 0.4 per cent in the year 2019-20, the IMF has stated in its report World Economic Outlook.

The IMF is seeing a subdued recovery in Pakistan with growth expected at 1.5% this year, driven by industry & construction. The path of the pandemic and the ability of the authorities to provide policy support will be important for that outcome.

The IMF has estimated inflation rate in Pakistan at 8.7 per cent in ongoing fiscal year as compared to 10.7 per cent in previous year. The Fund has estimated that inflation would reduce to 8 per cent in next financial year. Meanwhile, Pakistan’s current account deficit has been projected at 1.5 percent of the GDP in present fiscal year as against 1.1 per cent in previous year. The unemployment rate in Pakistan is projected to increase to 5 percent in current fiscal year from 4.5 percent of the last year. For next year, the IMF has estimated unemployment rate at 4.8 percent.

IMF has estimated inflation rate in Pakistan at 8.7pc in ongoing FY as compared to 10.7pc in previous year

According to the IMF, global prospects remain highly uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support. The outlook depends not just on the outcome of the battle between the virus and vaccines—it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.

Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility. High uncertainty surrounds this outlook, related to the path of the pandemic, the effectiveness of policy support to provide a bridge to vaccine-powered normalization, and the evolution of financial conditions.

Output losses have been particularly large for countries that rely on tourism and commodity exports and for those with limited policy space to respond. Many of these countries entered the crisis in a precarious fiscal situation and with less capacity to mount major health care policy responses or support livelihoods. The projected recovery follows a severe contraction that has had particularly adverse employment and earnings impacts on certain groups.

Youth, women, workers with relatively lower educational attainment, and the informally employed have generally been hit hardest. Income inequality is likely to increase significantly because of the pandemic. Close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections. Moreover, learning losses have been more severe in low-income and developing countries, which have found it harder to cope with school closures, and especially for girls and students from low-income households. Unequal setbacks to schooling could further amplify income inequality.