World Bank predicts more inflation in Pakistan in FY20

The World Bank has forecasted Pakistan’s economic growth to slow down for the next two years as it faces yet another macroeconomic crisis due to massive twin deficits and low foreign reserves, according to a report entitled “South Asia Focus: Making (De)centralization Work” released from Washington on Sunday.

The WB, in its annual flagship report, further notes that Prime Minister Imran Khan’s government would miss inflation, public debt, and fiscal deficit reduction targets while underlining major challenges that the government will encounter at least till the end of the third year in power.

GDP growth (at factor cost) decelerated to 3.3 percent in FY19 – 2.2 percentage points lower than FY18 – as gradual policy adjustments to tackle macroeconomic imbalances started to take effect. These adjustments included a tightened monetary stance, cuts in public sector development expenditures, and enhanced focus on higher tax collections. As a result, large scale manufacturing, which accounts for half of the overall industrial output, contracted by 3.6 percent in FY19. The services sector, which contributes over 60 percent to total output, decelerated to 4.7 percent in FY19 compared to 6.2 percent last year.”

It observes that despite of having an IMF extended fund facility, the country’s economic growth was expected to remain low in the near term and that Pakistan’s economic behaviour is different than all the other South Asian nations.