ISLAMABAD: A new United Nations report warns that the global economic growth is projected to slow down to only 1.9 per cent in 2023, sharply lower than the 3pc in 2022. However, the report says, the global growth is forecast to moderately pick up to 2.7pc in 2024.

This will be one of the lowest growth rates in recent decades, apart from the 2007-8 financial crisis and the height of the Covid-19 pandemic, said the World Economic Situation and Prospects 2023 report, released on Wednesday

The outlook for South Asia has deteriorated and is subject to multiple downside risks amid global monetary tightening, fiscal vulnerabilities, rising inflation and extreme weather vents. The regio­nal GDP growth is expected to slow to 4.8pc in 2023 from an estimated 5.6pc expansion in 2022.

In Pakistan, the economy is expected to expand by only 2.5pc in 2023 as devastating floods caused significant damages, particularly for agriculture, with spillover effects on related industrial and service sectors.

Overall, weaker global demand, tighter monetary policy, additional supply disruptions, further escalation in commodity prices and the emergence of new Covid-19 variants pose significant risks in 2023.

The floods in Pakistan caused unemployment, given that 43pc of employed people work in agriculture in the most affected areas. The report says as the United States Federal Reserve raised its policy rate and international investors reduced their exposures to developing markets in 2022, South Asian currencies weakened significantly against the dollar.

Existing high levels of sovereign debt and unsustainable debt-servicing burdens prompted several South Asian countries to seek multilateral financial support in the second half of 2022. Consumer price inflation in South Asia, particularly in Pakistan and Sri Lanka, accelerated markedly in 2022, driven by rising global fuel and food prices.

“In most countries we expect that private consumption and investment will weaken due to inflation and higher interest rates,” said Ingo Pitterle, Senior Economist at the UN Department of Economic and Social Affairs.

The report found that most developing countries saw a slower job recovery in 2022 and continue to face relatively high levels of unemployment. Disproportionate losses in women’s employment during the initial phase of the pandemic have not been fully reversed, with improvements mainly arising from a recovery in the informal sector.

Slower growth, coupled with elevated inflation and mounting debt vulnerabilities, threatens to further set back hard-won achievements in sustainable development, it warns.

After a long period of price stability, inflation has returned in many countries.

Pandemic-induced inflationary pressures have proven persistent, with demand recovering quickly and supply lagging amid significant disruptions in supply chains.

Soaring food and energy prices and renewed supply shocks, caused by the war in Ukraine, have not only fuelled a surge in inflation but also pushed up short- and medium-term inflation expectations.

Published in Dawn, January 27th, 2023