ISLAMABAD: The International Monetary Fund (IMF) has acknowledged Pakistan’s stronger economic activity and kept the global growth forecast largely unchanged at six per cent for the current year and 4.9pc for the next year.

In its World Economic Outlook (WEO) update released on Tuesday, the IMF revised downward India’s current year growth forecast by three percentage points because of widespread Delta variant and resultant subdued economic activities.

“Projections are revised up for the Middle East and Central Asia due to robust activity in some countries (such as Morocco and Paki­stan), partially offset by downgrades of some others,” the IMF noted but did not specifically mention Pakis­tan’s expected growth rate that it had forecast in April this year at 4pc for 2022 and 5pc by 2026.

The Fund said the 2021 global forecast was unchanged from the April 2021 WEO, but with offsetting revisions. Prospects for emerging market and developing economies have been marked down for 2021, especially for emerging Asia. By contrast, the forecast for advanced economies has been revised up. These revisions reflect pandemic developments and changes in policy support.

The 0.5 percentage point upgrade for 2022 derives largely from the forecast upgrade for advanced economies, particularly the United States, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.

In Saudi Arabia, non-oil growth projection has been revised up, but the overall GDP forecast has been downgraded relative to the April WEO on account of subdued oil production below the Opec-plus (Orga­n­isation of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters) quota earlier in the year.

Fund keeps global growth forecast largely unchanged at 6pc

IMF’s Economic Counsellor and Director of the Research Department Gita Gopinath noted that while the global economic recovery continues, a widening gap between advan­ced economies and many emerging market and developing economies was also emerging.

“Our latest global growth forecast of 6pc for 2021 is unchanged from the previous outlook, but the composition has changed,” she said, explaining that growth prospects for advanced eco­n­omies this year improved by 0.5 percentage point, but this was offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia.

The IMF noted that the Covid-19 pandemic had reduced per capita income in advanced economies by 2.8pc, relative to pre-pandemic trends over 2020-22, compared with an annual per capita loss of 6.3pc a year for emerging market and developing economies (excluding China).

These revisions reflect to an important extent differences in pandemic developments as the Delta variant takes over. Close to 40pc of the population in advanced economies has been fully vaccinated, compared with 11pc in emerging market economies, and a tiny fraction in low-income developing countries.

“Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of Covid-19 cases in some countries, notably India, have led to downgrades,” the IMF said.

Talking about emerging market and developing economies (EMDE), the WEO update said the forecast for the group had been revised down 0.4 percentage point in 2021, compared with the April WEO, largely because of growth markdowns for emerging Asian economies. “Growth prospects in India have been downgraded following the severe second Covid wave during March-May and expected slow recovery in confidence from that setback,” it added.

Similar dynamics were also noted at work in the Asean-5 group (Indonesia, Malaysia, Philippines, Thail­and and Vietnam) where recent infection waves were causing a drag on activity. China’s 2021 forecast is revised down 0.3 percentage point on a scaling back of public investment and overall fiscal support.

The IMF noted that despite near-term supply disruptions, global trade volumes would expand 9.7pc in 2021, moderating to 7pc in 2022. The merchandise trade recovery is set to broaden after being initially concentrated in pandemic-related purchases, consumer durables and medical equipment. Services trade is expected to recover more slowly, consistent with subdued cross-border travels until virus transmission declines to low levels everywhere.

Published in Dawn, July 28th , 2021

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