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Thursday, November 30, 2023
HomeWorldWorld Bank cuts Pakistan's growth projection by 2 per cent after floods

World Bank cuts Pakistan’s growth projection by 2 per cent after floods

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World Bank Pakistan floods GDP
Image: Reuters

The World Bank has estimated that Pakistan’s GDP growth will slow down from 5 per cent in the fiscal year 2022 to around 2 per cent in the fiscal year 2023 following one of the most devastating floods in the country’s history.

It also projected that poverty would go up by 2 to 4.5 pc while committing USD 2 billion in loans for flood-affected areas, reported The News International.

In the South Asian region, Pakistan’s macroeconomic projection remains second worst after Sri Lanka where the GDP growth was projected to go negative.

“Without creating buffers on internal and external fronts, the economies in South Asia will be facing challenges like Sri Lanka,” Hans Timmer, World Bank Chief Economist for South Asia said while addressing a virtual news conference from Washington DC on the occasion of launching WB’s Fall 2022 Economic Outlook for South Asia on Thursday.

The WB projected a massive downward revision in the GDP growth rate to 2 per cent for Pakistan against an official projection of 5 pc, hiking inflation up to 23 pc against the target of 11.5 pc, budget deficit of 6.9 pc of GDP against official estimates of 4.9pc and primary deficit at negative 3 pc of GDP against the official target of surplus 0.2 pc of GDP for the current fiscal year provided Islamabad remained under the existing IMF arrangement of Extended Fund Facility (EFF), reported The News International.

The WB has projected that poverty would go up by 2 to 4.5 pc, pushing 5.8 million to 9 million people below the cruel clutches of the poverty line in Pakistan.

“The floods have heightened macroeconomic risks. Continued policy tightening has become more challenging on account of floods. The government will face challenges in implementing the planned fiscal consolidation, given the extensive relief and recovery needs. Additional downside risks include unexpected damages resulting from the still-evolving flooding situation that could further reduce output and worsen economic imbalances; political pressures that undermine the implementation of a coherent and prudent macroeconomic policy mix; unanticipated deterioration of external conditions; and risks associated with large fiscal and external financing needs,” the WB’s Pakistan Development Update, launched here at the Bank Office on Thursday, said.

To manage these uncertainties, the WB suggested that the government should adhere to sound economic management, while carefully targeting any new expenditures to the poor and maintaining progress on critical structural reforms, including in the energy sector, reported The News International.

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