IMF Forecasts Pakistan’s GDP Growth Rate at 1.5% for 2021

The International Monetary Fund (IMF) has projected Pakistan’s GDP growth rate at 1.5 percent for 2021 against a negative 0.4 percent in 2020.

IMF, in its latest report, “World Economic Outlook (WEO), managing divergent recoveries,” has projected GDP growth rate at 1.5 percent in 2021 against -0.4 percent in 2020 and projected at 4 percent for 2022.

It is worth mentioning that last month, Pakistan’s central bank revised its growth target to around 3 percent, from slightly above 2 percent for the current year.

The Fund has also projected a decline in inflation from 10.7 percent in 2020 to 8.7 percent in 2021, which is projected to decline to 8 percent in 2022. The current account balance is projected at -1.5 percent of GDP for 2021 against -1.1 percent in 2020, and -1.8 percent is projected for 2022.

The Fund has projected unemployment at 5 percent for 2021 against 4.5 percent in 2020 and projected at 4.8 percent for 2022.

The report noted that one year into the COVID-19 pandemic, the accumulating human toll continues to raise concerns, even as growing vaccine coverage lifts sentiment. After an estimated contraction of –3.3 percent in 2020, the global economy is projected to grow at 6 percent in 2021, moderating to 4.4 percent in 2022.

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The contraction for 2020 is 1.1 percentage points smaller than projected in the October 2020 World Economic Outlook (WEO), reflecting the higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working.

The projections for 2021 and 2022 are 0.8 percentage point and 0.2 percentage point stronger than in the October 2020 WEO, reflecting additional financial support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year.

Global growth is expected to moderate to 3.3 percent over the medium term, reflecting projected damage to supply potential and forces that predate the pandemic, including aging-related slower labor force growth in advanced economies and some emerging market economies.

Close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections. Moreover, learning losses have been more severe in low-income and developing countries, which have found it harder to cope with school closures and especially for girls and students from low-income households. Unequal setbacks to schooling could further amplify income inequality, added the report.

The IMF report stated that future developments will depend on the path of the health crisis, including whether the new COVID-19 strains prove susceptible to vaccines or they prolong the pandemic; the effectiveness of policy actions to limit persistent economic damage (scarring); the evolution of financial conditions and commodity prices; and the adjustment capacity of the economy.