The International Monetary Fund (IMF) has warned that Pakistan’s economic recovery could face renewed pressure as growth slows and inflation rises again amid global uncertainty triggered by escalating tensions in the Middle East, sources told ProPakistani.
The IMF has projected global economic growth to moderate to 3.4 percent, a downgrade linked largely to geopolitical instability, disrupted energy markets, and rising economic risks stemming from the ongoing Gulf War.
The report noted that the duration and intensity of the Middle East crisis will play a decisive role in shaping the global economic outlook in the coming years.
Big one for Pakistan
For Pakistan, the IMF expects economic expansion to remain constrained, forecasting GDP growth at 3.6 percent for the current fiscal year, falling short of the government’s 4.2 percent target.
The outlook suggests that while stabilization measures have helped restore relative macroeconomic balance, structural weaknesses and external pressures will likely limit stronger economic growth.
Inflation, which had eased significantly last year, is now expected to rise again.
The IMF estimates average inflation at 7.2 percent during the ongoing fiscal year, with further acceleration to 8.4 percent anticipated next year, indicating renewed pressure on household purchasing power and business costs.
The previous fiscal year had recorded inflation at 4.5 percent, highlighting the risk of price pressures returning sooner than expected.
Purchasing Power?
The report offered a slightly positive outlook on employment, projecting unemployment to decline marginally from 7.1 percent to 6.9 percent this year. However, slower growth combined with higher inflation could limit meaningful relief for consumers.
On the external front, Pakistan’s current account deficit is expected to remain contained at around 0.4 percent of GDP this year but may widen to 0.9 percent next year due to global energy price volatility.
The IMF emphasized that the ongoing war in the Middle East is already affecting global energy supply chains and financial markets, so Pakistan will be forced to reassess policy priorities for the upcoming fiscal year.
Raise the interest rates now.