Pakistan projections of Economy

 Pakistan's economy has been the subject of economic projections from both the Asian Development Bank (ADB) and the World Bank (WB). The two projections depict Pakistan as a country in extraordinary monetary pressure and confronting the most terrible stagflation, with no genuine possibility of a significant improvement in the medium run. In fact, a comprehensive report on Pakistan has been prepared by the World Bank: Recent Economic Changes, Prospects, and Dangers

The World Bank has decreased its previous annual GDP growth forecast from 2% in 2022-23 to 0.4 percent. The ADB anticipates that it will be just 0.6% higher. Pakistan will grow faster than Sri Lanka's post-default economy, which is expected to see a significant decline of 3 to 4 percent in GDP, among South Asian nations.

Pakistan's growth prospects in 2022 and 2023 are still somewhat optimistic for both development banks. Recent statistics show that the floods caused more damage to crop output than was initially thought. Production of cotton, rice, and maize is down by 35.0 percent, 29.2 percent, and 13.5 percent, respectively, when compared to the level that was achieved the previous year. The major crop sector has seen a drop of over 6% as a result of this alone. Minor crop supplies have also been severely impacted, as evidenced by the dramatic rise in vegetable prices and the loss of more than one million livestock. The World Bank only projects a 1% decline in agricultural output in 2022 and 2023, while a conservative estimate of 3% indicates a decline.

In a similar vein, it is likely that the World Bank underestimated the 2.3% decline in the industrial sector. In the first seven months of 2022-23, the large-scale manufacturing sector has already demonstrated a decrease of 4.4 percent. Due to recent closures in numerous industries, the fall has grown over the past few months. Cement production has decreased by 13.1% and iron and steel by more than 3% during the construction sector's severe recession. Overall, the industrial sector's decline in value-added in 2022 and 2023 is likely to be significantly larger than the World Bank's estimate.

The WB anticipates a positive growth rate of 1.8% in the services sector in 2022 and 2023. Again, this is too high because two of the largest subsectors, transportation and communications and wholesale and retail trade, are likely to contract this year. The first is brought on by the volume of imports and the negative growth rate in the sector that produces commodities. The quantum decrease in consumption of High Speed Diesel (HSD) oil and motor spirit (MS) of 23.3 percent and 14.9 percent, respectively, indicates that the latter is also likely to decrease.

Overall, the most recent statistics on production and consumption for the first eight months have made the short-term growth outlook for 2022-23 even worse. In the past, we anticipated that the GDP growth rate in 2022 and 2023 would probably be negative one percent. Being in the scope of negative 2% to 2.5 percent is presently more probable. It is evident that the WB and ADB's growth rate projections are still optimistic.

The pace of expansion in 2022-23 has been assessed at 27.5 percent by the ADB and at 29% by WB. As of now, the typical pace of expansion had arrived at 27.2 percent in the initial nine months, with a considerably higher pace of 35.4 percent in Walk 2023. In effect, the ADB anticipates a decrease in inflation rates after March 2023. The WB's projection suggests a typical pace of expansion in the last quarter of 2022-23 of 34.4 percent. Despite this, it is still somewhat lower than the March inflation rate. The more likely scenario is for the rate of inflation to remain roughly the same or even rise in the final quarter. As a result, the expected rate of inflation in 2022 and 2023 is likely to be between 30 and 30.5%.

Additionally, the WB has predicted the size of the two deficits in 2022 and 2023. In 2022 and 2023, it is anticipated that the fiscal deficit will reach 6.7% of GDP and the current account deficit will be limited to 2% of GDP.

The diligent efforts made to limit the volume of imports, particularly through import LC control, are reflected in the current account deficit's low level. As a result, the value of goods and services imported is down by as much as 22.5%. Is it possible to implement such a significant reduction in the fourth quarter of 2022-23? Due to the significant shortfall in domestic cotton production, total cotton imports in 2022-23 will need to be close to 4 million bales higher than they were the previous year in order for the textile sector's output and exports to continue. Also, imports of wheat should be over 2.5 million tons.

In addition, petroleum product imports have decreased by as much as 32% in volume over the first eight months, raising concerns about supply disruptions. Hence, the extreme compression of imports that occurred in the initial nine months may not be manageable. As a result, the current account deficit might experience more pressure in the fourth and final quarter of 2022 and 2023. In the event that, in any case, the strategy of vigorously limiting imports proceeds with we are probably going to observe extreme deficiencies and a further upsurge in costs.

The spending plan shortfall projection of 6.7 percent of the Gross domestic product addresses a huge uniqueness of 1.8 percent of the Gross domestic product from the objective of 4.9 percent of the Gross domestic product for 2022-23. Due to significantly higher interest rates and an increase in borrowing, this is primarily attributable to the quantum jump in debt servicing. It is likely to be higher by 1.5% of GDP. As a result, the budget deficit in 2022 and 2023 could exceed 7% of GDP if FBR and petroleum levy revenues and the provincial cash surplus both fall short of expectations.

The World Bank's most alarming prediction is that Pakistan will require an average of $28.95 billion in external financing over the next three years, from 2022-23 to 2024-25.