More economic woes as WB revises Pakistan's growth downward to 1.7pc

The economy slowed sharply in FY23 with real GDP estimated to have contracted by 0.6pc

ISLAMABAD (Web Desk) - Pakistan's economy seems to be in the doldrums as the World Bank (WB) has revised the country’s GDP growth projection for the current fiscal year 2023-24 to 1.7 per cent from 2pc that was earlier projected.

In its latest report -- “Pakistan Development Update: Restoring Fiscal Sustainability”, the global lender says the current policy framework is leading the country to sluggish growth and extremely high macroeconomic risks, despite assuming effective implementation of the Stand-by-Arrangement (SBA) and a stable political environment.

Pakistan’s economy slowed sharply in FY23 with real GDP estimated to have contracted by 0.6pc, as the decline in economic activity reflects the accumulation of domestic and external shocks including the floods of 2022, government restrictions on imports and capital flows, domestic political uncertainty, surging world commodity prices, and tighter global financing.

According to the WB, the consumer price inflation is projected to moderate to 26.5pc in FY24 and to 17pc in FY25 owing to high base effects and the gradual dissipation of domestic supply chain disruptions, despite the weak currency and upward adjustments to administered domestic energy prices. 

The poverty headcount is estimated to have reached 39.4pc in fiscal year 2023, with 12.5 million more Pakistanis falling below the lower-middle income country poverty threshold ($3.65/day 2017 per capita) relative to 34.2pc in fiscal year 2022, the WB report further says.

Without a sharp fiscal adjustment and decisive implementation of broad-based reforms, Pakistan’s economy will remain vulnerable to domestic and external shocks.

The WB further states the real GDP growth is projected to recover to 1.7pc in FY24 and 2.4pc in FY25 if the robust implementation of the IMF SBA, new external financing and continued fiscal restraint is ensured.