Unemployment, inflation to rise: IMF

ISLAMABAD: Without incorporating the impact of recent floods, the International Monetary Fund (IMF) has kept Pakistan’s GDP growth projection at 3.5 percent for the current fiscal year 2022-23 against 6 percent growth achieved in the last financial year.

The World Economic Outlook (WEO) released by the IMF on Tuesday explained the 2022 projections for Pakistan are based on information available as of the end of August and do not include the impact of recent floods. The IMF also projected that unemployment will go up and will be standing at 6.4 percent for the current fiscal year against 6.2 percent for the last financial year.

The Fund has assessed that the CPI-based inflation will go up and will be standing at 19.9 percent in the current fiscal year against the officially released figure of 12.1 percent for the last fiscal year. On account of unemployment, the IMF has projected that the level of unemployment stood at 6.2 percent in FY-2021, which rose to 6.2 percent in FY-2022. Now, it is projected that the unemployment will rise to 6.4 percent.

The current account deficit is projected to remain at 2.5 percent of GDP for the current fiscal year against 4.5 percent for the last financial year. The current account deficit is projected to remain negative 2.4 percent for FY-2027.

The WEO report says that global economic activity is experiencing a broad-based and sharper-than-expected slowdown with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.

Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022, but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.