IMF lowers country's growth forecast to pc.

Byline: Khaleeq KianiUpdated

ISLAMABAD -- The International Monetary Fund (IMF) on Wednesday lowered Pakistan's growth forecast by half to one per cent for the next fiscal year as the global economy appears to have suffered greater setbacks following the Covid-9 pandemic and shows slower signs of recovery than previously anticipated.

On April 4, the IMF had estimated Pakistan's GDP going negative .5pc in the fiscal year 29-2 and a 2pc growth rate for FY22-2 in its flagship World Economic Outlook (WEO). The Fund now revised its forecast to -.4pc for the current fiscal in line with the government's estimates.

However, as part of its WEO update released on Wednesday, the IMF also revised downward its next year's growth forecast to pc from 2pc in April update and the Pakistan government's target of 2.pc set for the next fiscal year.

The IMF said the global growth was now projected at -4.9pc in 22, .9 percentage points below the April 22 WEO forecast. Consumption growth, in particular, has been downgraded for most economies, reflecting the larger-than-anticipated disruption to domestic activity.

Global economy shows slower signs of recovery than previously anticipated

The projections of weaker private consumption reflect a combination of a large adverse aggregate demand shock from social distancing and lockdowns, as well as a rise in precautionary savings. Moreover, investment is expected to be subdued as firms defer capital expenditures amid high uncertainty.

In the baseline, global activity is expected to trough in the second quarter of 22, recovering thereafter. In 22, growth is projected to strengthen to 5.4pc, .4 percentage point lower than the April forecast. Consumption is projected to strengthen gradually next year, and investment is also expected to firm up, but to remain subdued.

The IMF said there was still pervasive uncertainty around this forecast that depended on the depth of contraction in the second quarter of 22 (for which complete data is not yet available) as well as the magnitude and persistence of the adverse shock.

For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity. Moreover, the forecast assumes that financial conditions - which have eased following the release of the April 22 WEO - will remain broadly at current levels. Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving.

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