ISLAMABAD: The World Bank has said that Pakistan’s economic outlook will remain tight during the current fiscal year and somewhat recover next year amid global economic challenges.
The World Bank in its latest publication Global Economic Prospects — January 2024” noted that Pakistan’s currency exhibited signs of stabilization by the end of 2023. The report said that the economic output in the South Asian country contracted an estimated 0.2 percent in fiscal year of 2023 as a result of the effects of damage from the 2022 floods.
Consumer price inflation remained high, partially reflecting currency devaluation in early 2023, the report maintained. However, by end of 2023, the rupee showed signs of stabilization, driven by a variety of factors, the report added. These factors including increased liquidity in the foreign exchange market because of tighter enforcement of regulations, a balance-of-payments surplus on account of low import demand, and a shrinking money supply.
World Bank’s Report
The report observed that as poorer households spend more money on food, rising prices would disproportionately affect the vulnerable, increasing poverty. The risk is especially high in countries with limited fiscal shields to mitigate adverse effects, including Nepal and Afghanistan.
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It added that uncertainty around elections in South Asian countries could dampen economic activity in the private sector. The reported stated that Bangladesh, India, Bhutan, Maldives, and Pakistan elections are scheduled in 2024. The heightened uncertainty around these polls might dampen activity in the private sector, including foreign investment, the report added.
The report said, “If combined with political unrest and elevated violence, this could further disrupt and weaken economic growth in these countries”. In addition, particularly in states with weak fiscal positions, a rise in spending before these polls could exacerbate macro-fiscal vulnerabilities, the report maintained. However, the implementation of policies to decrease uncertainty and strengthen growth potential after polls could lead to an improvement in prospects.
