Washington January 2023: With the World Bank warning that the global economy is “perilously close to falling into recession”, the development lender forecast Pakistan’s growth at 2.0 percent in fiscal year 2022/23 (July-June), in its annual Global Economic Prospects report Tuesday.
The bank said the figure for Pakistan growth was “half the pace that was anticipated last June, and faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty.”
Overall growth in South Asia is projected to slow to 5.5% in 2023 before picking up to 5.8% in 2024.”This pace reflects still robust growth in India, Maldives, and Nepal, offsetting the effects of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka,” the report said.
Growth in India is projected to slow to 6.9 percent in FY2022/23, a 0.6 percentage point downward revision since June, as the global economy and rising uncertainty will weigh on export and investment growth, it said, adding that the South Asian county was expected to be the world’s fastest growing major economy.
In Bangladesh, growth is expected to slow to 5.2 percent in FY2022/23 (July-June) due to rising inflation and its negative impact on household incomes and firms’ input costs, as well as energy shortages, import restrictions, and monetary policy tightening.
Food insecurity is rising in the (South Asian) region which consumes about one-fifth of its calories from wheat products, houses more than one-third of the global poor, and where food accounts for a greater share of its consumption basket compared to other emerging and developing economies, according to the report.
“Although global food price inflation appears to have subsided, risks of increased deprivation and inadequate nutrition remain elevated,” it said.
“Climate change is a significant threat in the region. The recent floods in Pakistan are estimated to have caused damage equivalent to about 4.8 percent of GDP. Extreme weather events can exacerbate food deprivation, cut the region off from essential supplies, destroy infrastructure, and directly impede agricultural production.”
At the global level, forecasts for growth in 2023 were cut nearly in half, dropping from 3% to 1.7%—the third-weakest pace of growth ever projected by the World Bank, behind paces recorded during the 2009 and 2020 recessions.
The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could foreshadow a new global recession less than three years after the last one.
“Given fragile economic conditions, any new adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions — could push the global economy into recession,” the bank said in a statement accompanying the report.
The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years — less than half the pace of the past two decades.
“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands from climate change,” World Bank President David Malpass said in a statement.