ISLAMABAD, Oct 9: Pakistan’s economic growth rate may slip to 3.5 per cent in 2009 as countries in South Asia are not totally immune to the financial crisis in the US and its subsequent fallout, International Monetary Fund data suggest.

Pakistan’s Gross Domestic Product (GDP) is likely to decline to 5.8 per cent this year and to 3.5 per cent next year, said the IMF World Economic Outlook 2008 released ahead of annual meetings of the IMF and the World Bank.

Pakistan recorded a GDP growth of 6.9 per cent in 2006 and 6.4 per cent in 2007.

The GDP rate in South Asia is estimated at 7.6 per cent this year and 6.4 per cent in 2009. The rate was 8.7 per cent in 2007.

Weakening external demand is likely to weigh on exports, but in some cases the impact may be mitigated by still-loose macroeconomic policies and currency depreciation.

“Investment will also moderate, mainly because of deteriorating export prospects. Consumption will ease because of still-high fuel and food prices, although subsidies, which are common in the region, may cushion the impact on purchasing power,” the report said.

The growth rate for 2009 is projected at 6.9 per cent in India, 5.6 per cent in Bangladesh, 5.7 per cent in Bhutan, 5.5 per cent in Nepal and 5.1 per cent in Sri Lanka.

Inflation for 2009 in Pakistan is projected at 23 per cent as against 12 per cent recorded last year.

The average inflation for 2009 in South Asia is projected at 8.8 per cent.

The inflation in India will be 6.7 per cent followed by 10 per cent in Bangladesh.

“Capital flows to some countries have become more volatile, particularly to those running sizable external deficits. Their currencies have come under pressure prompting central banks to intervene in support are India, Pakistan and Vietnam.

“A number of currencies in Africa and South and East Asia (for example, India, Korea, Pakistan, and South Africa) have depreciated over a longer period, in part owing to rising costs of commodity imports and widening current account deficits,” the IMF added.