IMF projects 3.2pc GDP growth rate for next fiscal

ISLAMABAD: Pakistan’s economy is expected to experience a boost, with the International Monetary Fund (IMF) projecting a 3.2% GDP growth rate for the fiscal year 2025, amidst declining inflationary pressures. This growth is anticipated to have a positive impact on the unemployment rate, albeit a slight one.

Ironically, the IMF projected GDP growth ranging to 4.2 percent to the fiscal year 2029 indicating that the low growth trajectory will remain even after the completion of the IMF programme beyond 37 months of the existing Extended Fund Facility (EFF). The population growth of the country stands at 2.55 percent, so the GDP growth rate of a little bit higher will remain insufficient to create jobs and dent poverty over the medium.

The question arises as to how the IMF programme will become beneficial in such an emerging scenario. According to the World Economic Outlook (WEO), 2024 report released by the IMF on Tuesday in Washington, D.C., on the occasion of annual meetings of the IMF/World Bank, the unemployment rate in Pakistan stands at 8 percent for the current fiscal year (FY25) against 8.5 percent during the last fiscal year ended on June 2024.

The current account deficit will hover around 0.9 percent of Gross Domestic Product (GDP) in the current fiscal year FY2025 against negative 0.2 percent of GDP in the last fiscal year that ended on June 30, 2024. The current account deficit stood at negative 1 percent of GDP in FY23. This data from the IMF demonstrated that the imports were curtailed to bring down the current account deficit but it also negatively impacted the real growth rate. However, the exchange rate was kept stable by curtailing import growth. To avert boom and bust cycles, Pakistan’s economic managers will have to manage a higher and sustainable growth path beyond 5 percent without the creation of a current account deficit and fiscal deficit.

The IMF forecasts steady but sluggish global economic growth, with a projected rate of 3.1% by 2029, short of pre-pandemic levels. The US economy is upgrading its growth projections, whereas Europe’s are downgraded. Asia’s growth accelerates, fueled by electronics and artificial intelligence demand, driven by significant investments in China and India. However, the Middle East, Central Asia, and Africa face growth obstacles due to commodity disruptions, conflicts and extreme weather events. Global growth prospects remain subpar, requiring continuous policy efforts to tackle underlying economic challenges. Global disinflation continues but services inflation remains high, requiring targeted monetary policies. Policymakers must balance near-term stability with structural reforms for long-term growth while protecting vulnerable groups, it concluded.