IMF projects sharp decline in growth

The International Monetary Fund (IMF) has projected a sharp decline in the GDP growth rate for Pakistan from 3.3 percent in 2019 to -1.5 percent in 2020, and projected rise in unemployment from 4.1 percent in 2019 to 4.5 percent in 2020, and further rise to 5.1 percent in 2021. The IMF in its latest report the "World Economic Outlook (WEO), the Great Lockdown" has projected GDP growth rate at -1.5 percent in 2020 against 3.3 percent in 2019, and projected at two percent for 2021.

The fund has also projected asrise in inflation from 6.7 percent in 2019 to 11.1 percent in 2020, which is projected to decline to eight percent in 2021.

The current account balance is projected at -1.7 percent of the GDP for 2020 against -5.1 percent in 2019, and -2.4 percent is projected for 2021.

The fund has projected general government lending/borrowing at -9.2 percent of the GDP for 2020 against -8.8 percent in 2019.

The report stated that the COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity.

As a result of the pandemic, the global economy is projected to contract sharply by -3 percent in 2020, much worse than during the 2008-2009 financial crisis.

Protecting lives and allowing healthcare systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus.

The health crisis is therefore having a severe impact on economic activity.

In a baseline scenario, which assumes that the pandemic fades in the second half of 2020, and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalises, helped by policy support.

There is extreme uncertainty around the global growth forecast.

The economic fallout depends on factors that interact in ways that are hard to predict, including the pathway of the pandemic, the intensity and efficacy of containment efforts, the extent of supply disruptions, the repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioral changes (such as people avoiding shopping malls and public transportation), confidence effects, and volatile commodity prices.

Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital flow reversals, and a collapse in commodity prices.

Risks of a worse outcome predominate.

Effective policies are essential to forestall worse outcomes.

Necessary measures to reduce contagion and protect lives, will take a short-term toll on economic activity but should also be seen as an important investment in long-term human and economic health. The immediate priority is to contain the fallout from the COVID-19 outbreak, especially by increasing healthcare expenditures to strengthen the capacity and resources of the healthcare sector, while adopting measures that reduce contagion. Economic policies will also need to cushion the impact of the decline in activity on people, firms, and the financial system; reduce persistent scarring effects from the unavoidable severe slowdown; and ensure that the economic recovery can begin quickly once the pandemic fades, the report maintains.