IMF maintains Pakistan's economic growth forecast at 2% for FY24

The International Monetary Fund (IMF), in its latest  World Economic Outlook report released Tuesday, projected Pakistan's economic growth forecast at 2% for the current fiscal year, unchanged from its revised January prediction, down from an earlier estimate of 2.5%. 

The IMF also projected a growth rate of 3.5% for FY25, adjusted down from 3.6% forecast in October 2023.

These estimates come after a quarterly review of Pakistan's macroeconomic status under the $3 billion Stand-By Arrangement, culminating in a Staff-Level Agreement on March 20.

The IMF’s growth forecast slightly exceeds the World Bank’s early April prediction of 1.8%, but falls below the Pakistani government’s target of 3.5%. The State Bank of Pakistan (SBP) anticipates a growth of between 2% and 3%.

The IMF also predicted that average inflation in Pakistan will reduce to 24.8% this year from last year's 29.2%, and slow further to 12.7% in the next fiscal year. The current account deficit is expected to rise from 0.7% of GDP last year to 1.1% this year and increase to 1.2% next year.

Unemployment in Pakistan is forecasted to decline from 8.5% in the previous fiscal year to 8% this year and further to 7.5% next year.

Globally, the IMF has increased its 2024 growth forecast to 3.2%, up by 0.1 percentage points from January and 0.3 points from October 2023. 

Despite this increase, the global economic pace remains historically low due to ongoing high borrowing costs, fiscal support withdrawal, and long-term impacts from the COVID-19 pandemic and geopolitical tensions.

Global inflation is expected to decrease from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. 

The report highlights persistent economic disparities and structural challenges that hinder the movement of capital and labor to more productive sectors.

The IMF notes balanced risks to the global outlook but warns of potential impacts from geopolitical tensions and high-interest rates. 

It emphasizes the importance of central banks achieving a smooth inflation reduction and the need for medium-term fiscal consolidation to maintain economic stability and support necessary reforms.