IMF Predicts Higher Inflation and Lower GDP Growth for Pakistan

International Monetary Fund (IMF) has projected an increase in the inflation rate for Pakistan to 7.5 percent (from 3.9 percent in 2018) and revised GDP growth rate downward to 4 percent in 2019 (from 5.8 percent in 2018).

IMF in its World Economic Report released in April 2018, had projected Pakistan’s GDP growth at 4.7 percent and inflation rate at 5.2 percent for 2019.

The IMF has projected a lower GDP growth rate for 2019 in comparison to 4.8 percent forecast by the World Bank and Asian Development Bank (ADB) for 2019.

The World Bank has projected inflation at 8 percent and ADB has forecast 6.5 percent for 2019 compared to 7.5 percent by the IMF.

The IMF report “World Economic Outlook (WEO) Challenges to Steady Growth”, states that growth in Pakistan is expected to strengthen from 5.4 percent in 2017 to 5.8 percent in 2018 (0.2 percentage point higher than in the April 2018 WEO), underpinned by improved energy supply, investment related to the China-Pakistan Economic Corridor, and strong credit growth.

However, macroeconomic stability gains have been eroding, putting the outlook at risk. Growth is expected to moderate to 4.0 percent in 2019, and slow to about 3.0 percent in the medium term.

The IMF report has also projected a slight rise in the unemployment ratio for Pakistan – from 6 percent in 2017 to 6.1 percent in 2018 and 6.1 percent in 2019. The current account balance is forecast at negative 5.3 percent for 2019 compared to negative 4.1 percent for 2017 and negative 5.9 percent 2018 respectively.

The report further states that over 2020–23, the revisions primarily reflect a downward reassessment of the still-strong growth prospects for India and a lower growth forecast for Pakistan and Turkey, in addition to continued weaker growth in Iran.

In the Middle East, North Africa, Afghanistan, and Pakistan region, growth is projected to increase from 2.2 percent in 2017 to 2.4 percent in 2018 and to 2.7 percent in 2019, stabilizing at about 3 percent in the medium term—a sizable downward revision compared with the April 2018 WEO forecast.