IMF forecasts slow, but improving growth for Pakistan


WASHINGTON: The International Monetary Fund (IMF) has forecast a slow growth rate of 3.1 per cent for Pakistan in the current year and an improvement to 3.7pc in the next year. At the launch of its World Economic Outlook here on Tuesday, ahead of its annual spring meetings, the IMF projected a steady increase in therate of inflation. The consumer price index is expected to be 8.8 per cent during the current year, up significantly from 7.4 per cent last year, and the rate may further rise to 9 per cent in 2015.

Likewise, the IMF said, the unemployment rate in Pakistan would remain on the receding mode — from 6.7pc last year to 6.9pc in the current year and 7.2pc next year.

The IMF said the current account balance in the country was expected to move in a very narrow band — from one per cent of the GDP in 2013 it was anticipated to come down to 0.9pc in the current year and then return to 1 per cent in 2015.

GLOBAL ECONOMY: The IMF said the global recovery was becoming broader, but the changing external environment posed new challenges toemerging markets and developing economies. It forecast global growthto average 3.6 per cent in 2014, up from 3pc in 2013, and to go up to 3.9pc in 2015.

The strengthening of the recovery from the `great recession’ in advanced economies is a welcome development, according to IMF staff, but the World Economic Report says that growth remained subpar and uneven across the globe.

“The recovery which was starting to take hold in October is becoming not only stronger, but also broader,” said IMF Chief Economist Olivier Blanchard. “Although we are far short of a full recovery, the normalisation of monetary policy — both conventional and unconventional — is now on the agenda.”

Mr Blanchard, however, cautioned that while acute risks had decreased, but not disappeared.

In this setting, the global economy is still fragile despite improved prospects, and important risks — both old and new — remain. Risks identified previously include finishing the financial sector reform agenda, high debt levels in many countries, stubbornly high unemployment, and concerns about emerging markets.

New worries on the horizon include persistently low inflation in advanced economies, a weaker outlook for emerging markets than thought in the second half of last year, and recent geopolitical strains. Against this background, the report underscored stronger policy efforts to fully restore confidence and ensure a durable and sustained global recovery.

Mr Blanchard said an accelerating US recovery would help world economy to grow 3.6pc this year against 3pc last year. The report, however, put the US growth rate at about 2.8pc for the current year.

In Europe, the growth had turned positive, the report said. Across the euro area, a strong reduction in the pace of fiscal tightening is expected to help lift growth. Outside the core euro area, contributions from net exports have helped the turnaround, as has the stabilisation of domestic demand.

However, growth in demand is expected to remain sluggish, given continued financial fragmentation, tight credit and a high corporate debtburden.

It said the economic activity in Japan was expected to get a boost from some underlying growth drivers, notably private investment and exports. Nevertheless, Japan’s economic activity overall was projected to slow moderately in response to a tightening fiscal policy stance in 2014–15, starting with the rise in consumption tax.

The report said that emerging markets and developing economies continue to contribute more than two-thirds of global growth, and their growth was projected to increase moderately from 4.7pc in 2013 to 4.9pc in 2014 and 5.3pc in 2015.

The forecast for China growth will remain broadly unchanged at about 7.5pc in 2014-15 as authorities seek to put the economy on a more balanced and sustainable growth path.

In India, the real GDP growth was projected to strengthen, partly due to government efforts to revive investment growth.

The report notes that the balance of risks to global growth has improved, but not diminished.

These include persistently low inflation in advanced economies, especially in the euro area and even in some cases deflation, lighter financial conditions and the resulting higher cost of capital may lead to a larger-than-projected slowdown in investment and durables consumption in emerging markets, and also ongoing developments in Ukraine for geopolitical instability.