Pakistan’s GDP growth is anticipated to significantly drop down to 2.1% in the current fiscal year as a result of political unrest and troubling economic indicators (FY23), Egyptian financial services provider EFG Hermes, said in a report released on Friday.
“We forecast real GDP growth will slow to 2.1% in FY23, from 6.2% in the previous fiscal year with the potential for a mild recovery in FY24 to 3.1%,” said the company in its report titled ‘Pakistan Economic Note’, Business Recorder reported on Friday citing the report.
Future political developments, which will determine the macro course, will largely determine the growth projection beyond the current fiscal year, the report stated.
According to the report, the country’s macro-outlook is being negatively impacted by the rise in political unpredictability.
“Political instability that has developed since early this year following the impeachment of former Prime Minister Imran Khan continues to threaten Pakistan’s macroeconomic outlook.”
Moreover, adding to the challenging external economic conditions, recent floods paint an unfavorable economic outlook, the report said.
While we are reassured it will repay its $1 billion maturing Sukuk in December, its external position remains very fragile with reserves of only $8 billion as of mid-November (equivalent to 1.5 months import cover), it said.
“In that respect, the macro sustainability really hinges on Pakistan’s ability to receive external support from friendly countries,” it said.
The report expects the Pakistani rupee (PKR) to remain under pressure despite the recent narrowing of the current account deficit.
“We project average inflation of 23.5% in FY23,” it said.
The Asian Development Bank (ADB) earlier in September predicted that Pakistan’s economic growth would slow down to 3.5% in the current fiscal year due to devastating floods, tighter policy, and the necessity of addressing significant fiscal and external imbalances.
