The World Bank on Tuesday forecast Pakistan’s economic growth to slow further to 2 percent during the current year because of the devastating floods and slowdown in global growth rate, as the top international financial institution warned of another global recession.
Global growth is also expected to slow “perilously close” to recession in 2023, the World Bank said, slashing its economic forecast on high inflation, rising interest rates and Russia’s invasion of Ukraine.
The World Bank’s latest forecast for the world points to a “sharp, long-lasting slowdown” with growth pegged at 1.7 percent, roughly half of the pace it predicted in June. This is among the weakest rates seen in nearly three decades, overshadowed only by the pandemic-induced recession of 2020 and global financial crisis in 2009.
In the latest Global Economic Prospects report, the World Bank said Pakistan’s economic output was not only declining itself but also bringing down the regional growth rate.
But the slow growth is not limited to just 2022-23 (FY23), as the report forecast the country’s GDP growth rate to improve to 3.2 percent in 2023-24 (FY24), but that too would be lower than the earlier estimate of 4.2 percent.
“Policy uncertainty further complicates the economic outlook” of Pakistan, in addition to flood damages and the resultant increase in poverty, the report said, explaining that an already precarious economic situation in Pakistan, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated in August last year by severe flooding, which cost many lives.
About one-third of the country’s land area was affected, damaging infrastructure, and directly affecting about 15 percent of the population.
“Recovery and reconstruction needs are expected to be 1.6 times the FY2022-23 national development budget,” it said, adding that the flooding is likely to seriously damage agricultural production — which accounts for 23 percent of GDP and 37 percent of employment — disrupting the current and upcoming planting seasons and pushing 5.8 million at 9 million people into poverty.
In advanced economies such as the US, growth will likely slow to 0.5 percent in 2023 — 1.9 points below June’s forecast. Meanwhile, the euro area is expected to flat line as it battles severe energy supply disruptions and price hikes related to Russia’s invasion. China is predicted to expand 4.3 percent this year, 0.9 points lower than the earlier forecast.
“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment,” warned World Bank President David Malpass.
The South Asian region is anticipated to grow by 5.5 percent and 5.8 percent in 2023 and 2024, respectively — slightly 0.3 percent to 0.7 percent lower than earlier estimates — mainly because of supporting 6.6 percent and 6.1 percent GDP growth in India.
“This pace reflects still robust growth in India, Maldives, and Nepal, offsetting the effects of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka. The deteriorating global environment, however, will weigh on investment in the region,” the report said.
In the region excluding India, growth in 2023 and 2024 — at 3.6 percent and 4.6 percent, respectively — is expected to underperform its average pre-pandemic rate.