The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday projected the country’s economic growth to decline to 2% in FY23, amid devastation induced by flash floods.

“The MPC discussed the post-flood macroeconomic outlook, based on currently available information, it projected GDP growth could fall to around 2% in FY23, compared to the previous forecast of 3-4% before the floods,” said the MPC in a statement.

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The MPC’s projection comes after record monsoon rains in south and southwest Pakistan and glacial melt in northern areas triggered flooding that has impacted nearly 33 million people in the South Asian nation of 220 million, sweeping away homes, crops, bridges, roads and livestock in damages estimated at $40 billion.

Moreover, the central bank projection comes in line with the World Bank, which earlier projected Pakistan’s GDP growth to slow from 6% in the fiscal year 2022 to around 2% in the fiscal year 2023, while inflation will rise to 23% from 12.2%.

The WB’s “October 2022 Pakistan Development Update: Inflation and the Poor” noted that preliminary estimates suggest that as a direct consequence of the floods, the national poverty rate for Pakistan can increase by 2.5 to 4 percentage points, pushing between 5.8 and 10 million people into poverty.

Meanwhile, the MPC in its statement noted that higher food prices could raise average headline inflation in FY23 somewhat above the pre-flood projection of 18-20%.

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“However, the impact on the current account deficit is likely to be muted, with pressures from higher food and cotton imports and lower textile exports largely offset by slower domestic demand and lower global commodity prices.

“As a result, any deterioration in the current account deficit is expected to be contained, still leaving it in the vicinity of the previously forecast 3% of GDP,” it added.