The International Monetary Fund (IMF) on Tuesday forecast Pakistan’s real Gross Domestic Product (GDP) at four per cent, coupled with elevated rate of inflation and high unemployment rate during the current fiscal year (FY22).
This growth rate is the same as projected by the Asian Development Bank (ADB) about two weeks ago.
Fitch Solutions had projected Pakistan’s growth rate at 4.2pc which was significantly lower than the budgeted target of 4.8pc. The State Bank of Pakistan has anticipated GDP growth at the higher side of 4-5pc.
On Friday, Pakistan had termed the World Bank’s estimate of 3.5pc economic growth in the previous fiscal year “unrealistic” and also stated that the Washington-based lender underestimated the current fiscal year’s economic growth rate at 3.4pc.
The Fund also projected that current account deficit (CAD), which was recorded at 0.6pc in the previous year, would increase to 3.1pc of the GDP or over $10 billion in the current fiscal.
It estimated CAD would rise from 0.6pc of GDP in FY21 to 3.1pc in FY22 and then reduce to 2.8pc by FY2026.
The global lender has given three-year estimates of major economic indicators of Pakistan in the World Economic Outlook (WEO) report that it released on the eve of the annual IMF-World Bank Group meetings.
“Looking ahead, headline inflation is projected to peak in the final months of 2021 but is expected to return to pre-pandemic levels by mid-2022 for most economies,” the report said, adding that given the recovery’s uncharted nature, considerable uncertainty remains, and inflation could exceed forecasts for a variety of reasons.
Clear communication, combined with appropriate monetary and fiscal policies, can help prevent “inflation scares” from unhinging inflation expectations.
The report stated that the average inflation rate in Pakistan could be 8.5pc, whereas on an annualised basis, the Fund has projected inflation at 9.2pc by the end of FY22.
The IMF projected the economic growth rate recovering slowly to 5pc of GDP by FY26, which it had estimated in April this year.
The Fund expected the Consumer Price Index (CPI) to slowly come down to 6.5pc by FY26.
The IMF reported that the global economic recovery continued amid a resurging pandemic that posed unique policy challenges. Gaps in expected recoveries across economy groups have widened since the July forecast, for instance between advanced economies and low-income developing countries.
Meanwhile, inflation has increased markedly in the United States and some emerging market economies. As restrictions are relaxed, demand has accelerated, but supply has been slower to respond. Although price pressures are expected to subside in most countries in 2022, inflation prospects are highly uncertain.
These increases in inflation are occurring even as employment is below pre-pandemic levels in many economies, forcing difficult choices on policymakers. Strong policy effort at the multilateral level is needed on vaccine deployment, climate change, and international liquidity to strengthen global economic prospects, the report added.
National policies to complement the multilateral effort will require much more tailoring to country-specific conditions and better targeting, as policy space constraints become more binding the longer the pandemic lasts, it added.