Pakistan's economic outlook for the Fiscal Year 2024 is bleak, with a mere 1.7% growth projected. Memorial Chairperson of the State Bank of Pakistan Dr. Waseem Shahid predicts that the monetary policy will remain tight to curb inflation, while the fiscal policy is expected to contract, driven by the burdensome weight of high debt-service payments. Talking to WealthPK, he said Pakistan’s economic downturn will continue in the current fiscal year, with only a marginal recovery anticipated in the following year amidst persistent global economic challenges. Shahid highlighted that political turmoil in Pakistan had severely undermined confidence, contributing to sluggish growth in private demand. However, as inflationary pressures gradually ease, a modest uptick in growth to 2.4% is anticipated in the fiscal year 2025. “The global economic scenario is painted as equally grim, characterizing the ongoing decade of the 2020s as a ‘wasted opportunity.’ The outlook is described as ‘dark’ beyond the next two years, with global growth projected to decelerate for the third consecutive year, dropping from 2.6% last year to 2.4% in 2024.” Developing economies are expected to grow at a modest 3.9%, over one percentage point below the average of the previous decade.

He emphasized that Pakistan's economic output contracted by an estimated 0.2% in the fiscal year 2023, attributed to the aftermath of the 2022 floods and escalating political uncertainty. Despite elevated consumer price inflation, signs of rupee stabilization emerged in late 2023 due to factors such as increased liquidity in the foreign exchange market, tighter regulatory enforcement, contracting money supply, balance-of-payments surplus, and temporary moratorium on Chinese debt repayments. Delving into the economic repercussions, he underscored a surge in spending on food, particularly by poorer households, leading to heightened food prices that disproportionately affect the vulnerable population, potentially increasing poverty and inequality. Shifting focus to the South Asia Region, he projected a marginal decrease in growth to 5.6% in 2024 from an estimated 5.7% last year, maintaining its status as the fastest-growing region among emerging markets and developing economies. He concluded that in countries with weak fiscal positions, increased spending ahead of elections could exacerbate macro-fiscal vulnerabilities.

Credit: Independent News Pakistan (INP)