World Bank cuts Pakistan’s GDP growth forecast to 2pc

The World Bank has slashed Pakistan’s GDP growth projection from four 4 per cent to 2 per cent for the fiscal year 2022-23 due to the devastating floods and slowdown in the global growth rate.

The World Bank, in its report Global Economic Prospects-January 202, said Pakistan’s real GDP was projected at 2 percent in FY2022/23, half the pace that was anticipated last June.

The report stated that an already precarious economic situation, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated last August 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.

It added the flooding was 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 complicated the economic outlook.

The report said that overall growth in South Asia is projected to slow to 5.5% in 2023 before picking up to 5.8% in 2024.

According to the report, food insecurity is rising in South Asia which consumes about one-fifth of its calories from wheat products. It said although global food price inflation appears to have subsided, risks of increased deprivation and inadequate nutrition remain elevated.

The report said: “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 stabilize macroeconomic conditions, inflationary pressures dissipate, and rebuilding begins following the floods, growth is expected pronounced than in much of the rest of the region, as adequate policy buffers have provided breathing room to support the ongoing recovery and boost public investment.

“Pakistan and Sri Lanka have had to tighten policies more rapidly in pursuit of macroeconomic stability,” it added.

“The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8 percent of GDP. Extreme weather events can exacerbate food deprivation, cut the region off from essential supplies, destroy infrastructure, and directly impede agricultural production”, the report added.