IMF lowers Pakistan’s FY25 GDP growth forecast to 2.6%

ISLAMABAD: The International Monetary Fund (IMF) has revised downward GDP growth rate projection by 0.4 percent for Pakistan to 2.6 percent for fiscal year 2025 against earlier projection of 3 percent (January 2025).

The Fund in its latest report, “World Economic Outlook (WEO) a critical juncture amid policy shifts”, projected GDP growth for Pakistan at 2.6 percent for 2025 and 3.6 percent for 2026.

The IMF in January 2025 WEO had projected GDP growth rate for Pakistan at 3 per cent for fiscal year 2025 and 4 percent for 2026.

Pakistan’s GDP grows 0.92% in July-Sept, 2.5% in FY24

The Fund has revised downward the inflation rate projection to 5.1 percent for the current fiscal year and 7.7 percent in fiscal year 2026 against 23.4 percent in fiscal year 2024.

The unemployment in the country is projected to decrease to 8 percent in 2025 against 8.3 percent in 2024, which is projected to be 7.5 percent in 2026.

The current account balance is projected at negative 0.1 percent for 2025 compared to negative 0.5 percent in 2024 and projected negative 0.4 percent for 2026.

The Fund projected general government net lending/ borrowing at negative 5.6 percent of GDP for 2025 compared to negative 6.8 percent of GDP for 2024.

However, the Asian Development Bank (ADB) has also revised Pakistan’s GDP growth forecast for the fiscal year 2025 down to 2.5 percent (3 percent in December 2024), while saying that the country’s outlook depends largely on the success of ongoing economic reform. The Bank also stated that the growth forecasts were finalised prior to the 2 April announcement of new tariffs by the US administration, so the baseline projections only reflect tariffs that were in place previously.

The World Bank cancelled the release of its Pakistan Development Outlook earlier scheduled for April 9 to reassess projections after Trump’s announcement.

The Fund report noted that after enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilised, with steady yet underwhelming growth rates. However, the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs.

Forecasts for global growth have been revised markedly down compared with the January 2025 WEO Update, reflecting effective tariff rates to levels not seen in a century and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected in January.

It further stated that intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions.

Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international cooperation could jeopardize progress toward a more resilient global economy.

Copyright Business Recorder, 2025