WASHINGTON: The International Monetary Fund (IMF) projected on Tuesday that Pakistan’s economy will continue to grow at a healthy pace in 2017 and 2018.
The World Economic Outlook, which precedes this week’s annual spring meeting of the IMF and the World Bank, also predicted a noticeable growth in the global economy in 2017, linked to an upsurge in investment, manufacturing and trade activities. The report projects that the world growth is expected to rise to 3.5 per cent this year and 3.6pc in 2018, from 3.1pc last year.
“In Pakistan, a broad-based recovery is expected to continue at a healthy pace, with growth forecast at 5pc in 2017 and 5.2pc in 2018, supported by ramped-up infrastructure investment,” the report added.
The report points out a weak growth in the near-term outlook for the Middle East, North Africa, Afghanistan, and Pakistan
region, with growth forecast to be 2.6pc in 2017, 0.8 percentage point lower than projected in the October 2016 report.
World economy to expand 3.5pc this year
The fund attributes this subdued pace of expansion to lower headline growth in the region’s oil exporters, driven by the November 2016 Opec agreement to cut oil production. This weakness overshadows the expected pickup in non-oil growth as the pace of fiscal adjustment to structurally lower oil revenues slows.
“Continued strife and conflict in many countries in the region also detract from economic activity,” the report warns.
Growth in Saudi Arabia, the region’s largest economy, is expected to slow to 0.4pc in 2017 because of lower oil production and ongoing fiscal consolidation, before picking up to 1.3pc in 2018.
Growth rates in most other countries in the Cooperation Council of the Arab States of the Gulf are similarly projected to dip in 2017.
By contrast, activity in most of the region’s oil importers is expected to continue to accelerate, with growth rising from 3.7pc in 2016 to 4.0pc in 2017 and 4.4pc in 2018.
In Egypt, comprehensive reforms are expected to deliver sizable growth dividends, lifting growth from 3.5pc in 2017 to 4.5pc in 2018. The report trims India’s annual growth forecast by 0.4 percentage points to 7.2pc for 2017, citing the impact of recent demonetisation.
“In India, the growth forecast for 2017 has been trimmed by 0.4 percentage point to 7.2pc, primarily because of the temporary negative consumption shock induced by cash shortages and payment disruptions from the recent currency exchange initiative,” says the report.
“Medium-term growth prospects are favourable, with growth forecast to rise to about 8pc over the medium term due to the implementation of key reforms, loosening of supply-side bottlenecks, and appropriate fiscal and monetary policies,” it adds.
In its review of the globally economy, the IMF notes that stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016.
The IMF’s October forecast was more pessimistic, cutting its growth forecast for the US and other advanced economies, the IMF said then that the global economy would grow 3.4pc this year versus 3.1pc in 2016.
But in Tuesday’s report, the IMF notes that higher commodity prices have provided some relief to commodity exporters and helped lift global headline inflation and reduce deflationary pressures.
“Financial markets are buoyant and expect continued policy support in China and fiscal expansion and deregulation in the United States. If confidence and market sentiment remain strong, short-term growth could indeed surprise on the upside,” it adds.
But the report warns that “structural impediments,” such as low productivity growth and high income inequality, will likely persist and could stall a stronger recovery.
The report also criticises “nationalistic” economic policies of the United States and other European Union, and calls them “inward-looking policies” that “threaten global economic integration and the cooperative global economic order, which have served the world economy, especially emerging market and developing economies, well.”
The report notes that against this backdrop, economic policies have “an important role to play in staving off downside risks and securing the recovery, and a renewed multilateral effort is also needed to tackle common challenges in an integrated global economy.”
The IMF points out that emerging market and developing economies have become increasingly important in the global economy in recent years. They now account for more than 75pc of global growth in output and consumption, almost double the share of just two decades ago.
“These economies can still get the most out of a weaker growth impulse from external conditions by strengthening their institutional frameworks, protecting trade integration, permitting exchange rate flexibility, and containing vulnerabilities arising from high current account deficits and external borrowing, as well as large public debt,” the World Economic Outlook projects.
Published in Dawn, April 19th, 2017