ISLAMABAD – World Bank has sharply lowered Pakistan’s growth forecasts from projections it made in October 2022 amid dilapidating economic conditions.
The international financial institution flagged tighter financial conditions and limited fiscal space as the key reason behind the slow growth forecast.
Last year, WB claimed GDP forecast to be at 2 percent but now makes a big cut as the country’s worsening economic situation and political turmoil directly impacted human development indicators.
In its Development Update released today, WB said slower growth reflects subdued private sector activity amid plunging confidence, import controls, belated fiscal tightening, and the effects of last year’s flood.
World Bank however predicted that Pakistan will salvage International Monetary Fund (IMF) bailout funds. The crisis-hit country faced monstrous floods and soaring commodity prices at international level after Russia Ukraine conflict.
Islamabad’s access to international capital markets was halted amid soaring macro risks and tighter global liquidity conditions.
Amid the deteriorating situation, the country’s forex reserves remained critically low while inflation shattered records.
In a statement, World Bank’s Country Director for Pakistan Najy Benhassine said the resolution of Pakistan’s economic crisis requires a commitment to sustained macro-fiscal and structural reforms.
It further maintained that outlook and progress with the IMF program depend heavily on securing new official external financing, with ongoing delays contributing to a further deterioration in confidence.
Amid soaring prices of basic commodities, inflation is likely to increase to 29.5 percent in the current Fiscal Year. Amid a worse situation in imports, the current account deficit of the South Asian nation is projected to shrink but will grow in the next Fiscal Year.
On the other hand, World Bank also cuts its 2023 regional growth forecast to 5.6pc from 6.1pc as several nations have increased interest rates at a rapid pace. For India, the global institution also lowered expected economic growth in the current fiscal year.
