Pakistan’s GDP Growth Forecast Reduced to 0.4% by World Bank for FY23-24

Pakistan’s economic growth prospects have been weakened due to tighter financial conditions and limited fiscal space, prompting the World Bank to significantly reduce its growth forecast for the country this year. The World Bank’s latest projection indicates that Pakistan’s economy will only grow by 0.4% this year, down from its previous estimate of 2% growth in October. This less optimistic forecast is based on the assumption that Pakistan will secure bailout funds from the International Monetary Fund.

The fiscal year in Pakistan begins in July and concludes in June. Although Pakistan anticipates a 2% growth rate in FY23, the head of the country’s central bank warned in January that the growth projection may encounter a decline in the near future.

Also Read: World Bank Forecasts India’s GDP Growth to Slow Down to 6.3% in FY24

For several months, the South Asian country has been experiencing severe economic turmoil due to a significant balance of payments crisis. Despite negotiations with the International Monetary Fund (IMF) to acquire $1.1 billion funding as part of a $6.5 billion bailout that was agreed upon in 2019, the country has yet to receive any funds.

The establishment of flour distribution centers in Pakistan has resulted IMF in riots and thefts. This is due to the combination of reduced economic productivity and increased prices.

Moreover, the World Bank has reported that South Asia’s impoverished populations are experiencing a higher degree of food insecurity, as they must allocate a significant portion of their income towards food due to increased global and domestic food prices. Consequently, the bank has revised its regional growth estimate for 2023 to 5.6%, down from the previous forecast of 6.1% in October.

According to the report, the region’s economies are facing downward pressure due to the escalation of interest rates and financial market uncertainty. As a result of the conflict in Ukraine last year, which disrupted supply chains and caused global inflation, most countries have rapidly increased their interest rates.

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Furthermore, the World Bank has predicted that Sri Lanka’s economy will undergo a 4.3% contraction this year due to the long-term consequences of the macro debt crisis. The country’s potential for future growth is heavily reliant on debt restructuring and structural reforms. Sri Lanka follows the calendar year, and in January, President Ranil Wickremensinghe anticipated a 3.5% or 4.0% decline in the country’s economy for 2023, following an 11% decrease in 2022. The World Bank has also projected that inflation in South Asia will decrease to 8.9% this year and below 7% in 2024.

Due to anticipated negative effects on consumption, the World Bank has revised its forecast for India’s economic growth in the current fiscal year (starting April 1) from 6.6% to 6.3%, reflecting a decrease in the country’s projected economic expansion.