Pakistan's economy to grow at 2% in 2023 - says World Bank projection

 World Bank has cut Pakistan's GDP growth from 4% to 2% in 2023

The World Bank in its Global Economic Prospects 2023 has lowered the projected GDP growth rate of Pakistan in 2023 from 4% to 2%.  The main reasons of this slowdown in the Pakistani economy are precarious economic situation, with low foreign exchange reserves and large fiscal and current account deficits.

 The super floods further worsened the economic situation in Pakistan. About one-third of the country’s land area was affected, damaging infrastructure, and directly affecting about 15 percent of the population.

This is mainly due to weak growth in Pakistan, which is projected at 2.0 percent in FY2022/23, half the pace that was anticipated last June. Pakistan faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty.

As the country implements policy measures to stabilise macroeconomic conditions, inflationary pressures dissipate and rebuilding begins following the floods, growth is expected. The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8 percent of GDP (Government of Pakistan et al. 2022). Extreme weather events can exacerbate food deprivation, cut the region off from essential supplies, destroy infrastructure, and directly impede agricultural production.

Recovery and reconstruction are expected to be 1.6 times the FY2022/23 national development budget (Government of Pakistan). The flooding is likely to have seriously damaged agricultural production — which accounts for 23 percent of GDP and 37 percent of employment — by disrupting the current and upcoming planting seasons and pushed between 5.8 and 9 million people into poverty. Policy uncertainty further complicates the economic outlook.

Pakistan, with low foreign reserves and high sovereign risk saw its currency depreciate by 14 percent between June and December and its country risk premium rise by 15 percentage points over this same period.

Pakistan’s consumer price inflation reached 24.5 percent in December on an annual basis, recently coming off its highest rate since the 1970s.

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