IMF Forecasts GDP Growth for Pakistan in 2024

The International Monetary Fund (IMF) has issued its projections for Pakistan’s economic performance in the coming years. According to the IMF’s latest report, titled “World Economic Outlook 2023, Navigating Global Divergences,” Pakistan is expected to experience a 2.5 percent GDP growth rate in 2024, a significant improvement from the negative 0.5 percent recorded in 2023.

In terms of inflation, the IMF anticipates a decrease, with a projected rate of 23.6 percent for 2024, down from 29.2 percent in 2023. Furthermore, consumer prices are expected to moderate by the end of 2024, with a projection of 17.5 percent, compared to 29.4 percent in 2023.

The current account balance is also predicted to show a negative figure, with a projection of negative 1.8 percent for 2024, as compared to negative 0.7 percent in 2023.

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The IMF’s projections indicate a decrease in unemployment for Pakistan, with a forecast of 8 percent in 2024, down from 8.5 percent in 2023. The general government net lending/borrowing is expected to be at negative 7.6 percent in 2024, showing a slight improvement from negative 8.1 percent in 2023.

The report from the IMF highlights various examples of improvements in communication strategies by central banks worldwide. For instance, Brazil’s decision to adopt a continuous 3 percent inflation rate target from 2025 onward is seen as an enhancement in operational effectiveness and communication strategy, which helps reduce uncertainty and improves the effectiveness of monetary policy. Similar initiatives include actions taken by the central banks of Pakistan and Uruguay since 2020 to announce their preset monetary policy meeting calendars in advance.

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On a global scale, the IMF projects a slowdown in economic growth, with global growth rates expected to decrease from 3.5 percent in 2022 to 3.0 percent in 2023 and further to 2.9 percent in 2024. These projections fall below the historical average of 3.8 percent for the period 2000-2019. Notably, the forecast for 2024 has been revised down by 0.1 percentage points compared to the July 2023 Update to the World Economic Outlook.

For advanced economies, the anticipated slowdown is from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024. This trend is influenced by stronger-than-expected momentum in the United States but weaker-than-expected growth in the euro area. Emerging markets and developing economies are also expected to experience a modest decline, moving from 4.1 percent growth in 2022 to 4.0 percent in both 2023 and 2024, with a downward revision of 0.1 percentage point in 2024, attributed to the property sector crisis in China.

The outlook for global growth in the medium term, at 3.1 percent, is at its lowest point in decades, and the prospects for countries to achieve higher living standards are relatively weak. Global inflation is projected to steadily decrease, moving from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024. However, it’s important to note that the forecasts for 2023 and 2024 have been revised upwards by 0.1 percentage point and 0.6 percentage point, respectively. Inflation is not expected to return to target levels until 2025 in most cases.

The global recovery from the COVID-19 pandemic and Russia’s invasion of Ukraine remains slow and uneven. Despite some earlier economic resilience, characterized by a reopening rebound and progress in reducing inflation from the peaks of the previous year, it is still premature to be overly optimistic. Economic activity continues to lag behind its pre-pandemic trajectory, particularly in emerging markets and developing economies, and disparities among regions are widening.

Various factors are hindering the recovery, including both long-term consequences of the pandemic, the ongoing conflict in Ukraine, and increasing geo-economic fragmentation, as well as cyclical factors such as the effects of necessary monetary policy tightening to combat inflation, the withdrawal of fiscal support amidst high debt levels, and extreme weather events.