Like most other regions and countries, the World Bank in its recent gross domestic product estimates has slashed growth forecast for Pakistan by two percentage points from its June 2022 estimates, warning of an imminent shock that could tip the country’s economy into further recession in the current year.
The World Bank’s global economic prospects report has also pointed to a “sharp, long-lasting slowdown” with the global growth pegged at 1.7 per cent this year, compared to 3 per cent it had predicted in June. The report says that the global growth rate was slowing down sharply in the face of growing inflation, higher interest rates and rising cost of living crisis, forcing the global financial institution to also cut its growth estimates for 2024.
The WB report “Global Economic Prospects – January 2023” postulates Pakistan’s real GDP was half the pace that was anticipated last June and points to an economy that is still in search of a firmer footing.
The report has viewed sequentially the overall challenges of the country’s economy estimated low foreign exchange reserves and large fiscal and current account deficits preceding financial year quarter marked by severe flooding.
Pakistan has been faces challenging economic conditions, including the repercussions of the last year’s flooding and continued political uncertainty, it said. The recent floods have caused damage equivalent to about 4.8pc of GDP and pushed the country into exacerbating food insecurity.
With global trade also becalmed amid the sharp slowdown in advanced economies, Pakistan would experience the weakest GDP rates seen in nearly three decades, overshadowed only by the pandemic-induced recession of 2020 and global financial crisis in 2009 which had wrecked the world economy to a point that requires an uphill task to recover from.
As GDP is measured in the currency of the country in question, the latest blow to the rupee, falling to Rs227.88 against the US dollar in the interbank market, slowed growth prospects and declined the output of the ongoing quarter. GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy.
Financial experts believe that low GDP affects a country’s economy and in most cases, the common man is adversely affected, and the poor are the worst hit. If a country’s GDP doesn’t grow, there will be low consumer demand, and thus it affects the average business income. The reduction in average business income will lower the new job opportunities. This is because it will pay its employees only when a business is performing well. Otherwise, businesses will start to lay off their workers and reduce the workers’ average income.
The latest GDP estimates for Pakistan are a key cause of gloom and the situation calls on the Pakistan government to enhance its defences against the financial spectre haunting the country. It also requires the government to give a serious thought to steer the country out of the stormy waters and avert a scary economic meltdown.
