IMF cuts Pakistan’s 2024 growth estimate to 2pc

ISLAMABAD: The International Monetary Fund (IMF) on Tuesday revised down Pakistan’s growth estimate for fiscal year 2024 to two percent – a 0.5pc reduction from October outlook, stated its World Economic Outlook (WEO).

According to the Fund’s World Economic Outlook (WEO) report, Pakistan’s growth estimate was downgraded by 0.5pc from 2.5pc in October’s outlook, expecting a “sluggish pace” of growth in the current fiscal year.

The IMF’s latest growth forecast is lower than the government’s 3.5pc GDP growth target for the current year. However, the Fund predicts a rebound in economic growth for the next fiscal year 2025, projecting a rate of 3.5pc.

Meanwhile, the IMF raised its 2024 global growth forecast to 3.1pc, citing unexpected resilience in major advanced and emerging market economies around the world, including the United States and China.

The updated figure is 0.2 percentage points higher than the October forecast.

“The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth,” the report stated.

The IMF’s chief economist, Pierre-Olivier Gourinchas, said the global lender’s updated World Economic Outlook showed that a “soft landing” was in sight, but overall growth and global trade still remained lower than the historical average.

“The global economy continues to display remarkable resilience, with inflation declining steadily and growth holding up. The chance of a ‘soft landing’ has increased,” Gourinchas told reporters in Johannesburg, adding, “We are very far from a global recession scenario.”

But he cautioned that the base of expansion was slow and risks remained, including geopolitical tensions in the Middle East and attacks in the Red Sea that could disrupt commodity prices and supply chains.

Delays in announced fiscal consolidation in what Gourinchas called “the biggest global election year in history” could boost economic activity but might also spur inflation, he added.

The IMF said the improved outlook was supported by stronger private and public spending despite tight monetary conditions, as well as increased labor force participation, mended supply chains and cheaper energy and commodity prices.

Global trade was expected to expand by 3.3% in 2024 and 3.6% in 2025, well below the historical average of 4.9%, with gains weighed down by thousands of fresh trade restrictions.

The IMF stuck with its October forecast for headline inflation of 5.8% for 2024, but lowered the 2025 forecast to 4.4% from 4.6% in October. Excluding Argentina, which has seen inflation spike, global headline inflation would be lower, Gourinchas said.

Advanced economies should see average inflation of 2.6%, down four-tenths of a percentage point from the October forecast, with inflation set to reach central bank targets of 2% in 2025. By contrast, inflation would average 8.1% in emerging market and developing economies in 2024, before easing to 6% in 2025.

The IMF said average oil prices would drop 2.3% in 2024, versus the 0.7% decline it had predicted in October, and said prices were expected to drop 4.8% in 2025.