The World Bank has predicted a low GDP growth rate for Pakistan’s economy. In Pakistan, economic growth is projected to remain below potential, at 0.5 percent for financial year 2021 compared to over 4 percent annual average in the three years prior to financial year 2018-2019. This projection, which is highly uncertain, is predicated on the absence of significant infection flare ups or subsequent waves that would require further widespread lockdowns.
Pakistan’s economy has been severely affected by measures taken to contain the COVID-19 pandemic. Economic activity contracted and poverty is expected to have risen in financial year 2020, as monetary and fiscal policy tightening.
Growth is expected to gradually recover but remain muted, given heightened uncertainty and the resumption of demand compression measures. A possible resurgence of the infection, widespread crop damage due to locusts and heavy monsoon rains pose major risks to the outlook.
Regarding outlook of the economy, the Word Bank says that while domestic economic activity is expected to recover, as lockdown measures are lifted, with a gradual decline in active COVID-19 cases, Pakistan’s near-term economic prospects are subdued.
Significant uncertainty over the evolution of the pandemic and availability of a vaccine, demand compression measures to curb imbalances, along with unfavorable external conditions, all weigh on the outlook.
Economic growth is projected to remain below potential, averaging 1.3 percent for financial year 2021-22. The current account deficit is expected to widen to an average of 1.5 percent of GDP over financial year 2021-22, with imports and exports gradually picking up as domestic demand and global conditions improve.
The fiscal deficit is projected to narrow to 7.4 percent in financial year2022, with the resumption of fiscal consolidation and stronger revenues driven by recovering economic activity and critical structural reforms.
Expenditures will remain substantial due to sizable interest payments, a rising salary and pension bill, and absorption of energy SOE guaranteed debt by the government.
Everything is not bad and depressing as this report gives the impression. Some sections of the economy already started to recover. The recovery in some sectors might take more time before returning to normal. The recovery might be long and painful.
The economic crisis is not over yet and government economic managers are prematurely declaring that worst is over. It is too early to say that economic crisis is over. There is no doubt that economy is recovering. But this recovery is slow. It is not yet reached at a level where common people and small businesses started to feel the impacts of this recovery.
There are good signs in the economy. Many medium and small business are still not taking their laid off workers back. Unemployment is still high and it needs targeted policies to reduce.
The economy and businesses that were badly hit during the lockdowns have shown resilience and performed better during the last three months. GDP is now projected to expand by 2pc this year compared to the bank’s projection of 0.5pc.
Asian Development Bank also projected the 2% growth in Pakistani economy. Many workers who lost jobs during the COVID-19 lockdown have returned to work. But still big number of people is jobless. The wages have been cut and they are forced to accept lower wages. The low wage workers are feeling the severe impact of wage cuts and higher inflation.
The cash handouts given by the government under the Ehsaas programme prevented hunger in several households. The rural population was also largely spared the crop losses in spite of the desert locust attack.
There is no denying that a possible resurgence of infection still poses a major risk to the economy, and the resumption of demand-compression measures under the IMF programme is likely to keep growth muted for some time. Yet the outlook is neither too desperate nor too encouraging. There is still uncertainty hanging over the future but there are also signs of recovery.
The situation demands that the government implement the required reforms to assist struggling businesses quickly get back on their feet, and address, in the words of a senior World Bank official, the weaknesses of the “informal sectors through smart policies” and by ensuring wise allocation of meagre public resources to help the poor.
Your email address will not be published. Required fields are marked *