Global recession forecast & economic outlook
THE global economic outlook for the year 2023 is gloomy, international financial institutions have anticipated that next year will feel like a global recession for millions of people, especially from emerging markets and developing countries.
This apprehension is backed by several historical indicators, the global economy is in the steepest slowdown following a post-recession recovery since 1970, global consumer confidence has suffered a much sharper decline than ever, and the inflation rate is continuously increasing due to hike in interest rates.
The largest three economies of to world, the United States of America, China, and Eurozone have been showing a slow growth rate and an average hit to the economy will cause a global recession.
While global economy was making recovery after a massive blow during the Covid-19 pandemic, the Russia-Ukraine war has aggravated the global economic crisis further.
The war is not only an ongoing humanitarian crisis, but it has also provoked a massive energy price shock not seen since 1970.
The increase in energy prices is taking a toll on the world economy and the International Energy Agency has termed it as a “first truly global energy crisis” which will have a far reaching effect if European gas storage runs short.
Another factor that contributed to the gradual decline in global growth rate is the disruption of economic activity in China as a result of President Xi Jinping’s “zero-Covid strategy”.
China has suffered economically a lot due to massive lockdowns of whole cities and regions, the waves of unstable and uncertain economy in China are likely to be felt around the globe for a long time to come.
In the United States, federal reserves have increased the interest rate, rising inflation, tightening job market and a slowdown in business activity sparking worries about recession.
The world is edging towards a major economic crisis and global recession seems inevitable, now what it means for the economy of Pakistan?
Pakistan is going through the worst economic crisis due to a mix of domestic and external, political, economic and natural threats.
The perception of Pakistan’s risk of default is growing with every passing day with the ever-increasing debt burden, falling reserves, rising inflation, massive devaluation of rupee, slow growth rate and rising Islamabad-IMF tension.
The recent floods have added more pressure to the already stagnant economic growth and adding more to the list the deflating political system and the looming threat of terrorism are painting a very bleak picture of Pakistan’s economic outlook in 2023.
Economic growth and development require political stability, sound governance and ample state capacity.
Pakistan, an IMF addict state, has already spent 22 of the past 30 years in a dozen different IMF bailout programs and is currently striving to seek more rents to run the machinery of government.
The current government is stuck between the rock and a hard place i.e., electoral victory, or making tough economic decisions and gaining public fury.
There is no easy way to come out of this crisis. Throughout history, Pakistan’ economy had a volatile growth pattern and without proper preparation, recession can irrevocably damage the state and its financial stability.
All stakeholders must sit together to develop a structural macro-economic strategy to save the sinking ship of the economy and sail through the upcoming economic recession.
The strategy should include facilitating marketing diversity by negotiating free trade agreements with various countries, enhancing regional trade, reducing the fiscal deficit, empowering local governments and focusing on agricultural yield instead of real estate sector development.
Each government has blamed its predecessors for the downfall of the economy, but it is time that all political parties must sign a “Charter of Economy” or the fear of default could become a reality. This is the time that national interest must prevail over political interest.
—The writer is Assistant Director-NUST Institute of Policy Studies (NIPS) and a former visiting lecturer at the National Defence University Islamabad.