Pakistan’s economy is projected to grow at 4.5 per cent in 2016 and 4.7 per cent in 2017, according to the new World Economic Outlook by the International Monetary Fund released on Tuesday.
However, growth in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region has weakened considerably because of further decline in oil prices and intensifying conflicts and security risks.
“Growth in the region overall is projected at 3.1 per cent in 2016 and 3.5 per cent in 2017, 0.8 percentage point and 0.7 percentage point weaker, respectively, than projected in the October 2015 WEO,” the report said.
For the global outlook, the IMF revised its forecast downward for 2016 to 3.2 per cent compared to its earlier projection made in January. The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies.
However, the report says that uncertainty has increased, and risks of weaker growth scenarios are becoming more tangible. Preliminary data suggests that global growth during the second half of 2015, at 2.8 percent, was weaker than previously forecast, with a sizable slowdown during the last quarter of the year.
The unexpected weakness in late 2015 reflected to an important extent softer activity in advanced economies especially in the United States, but also in Japan and other advanced Asian economies.
The picture for emerging markets is quite diverse, with high growth rates in China and most of emerging Asia, but severe macroeconomic conditions in Brazil, Russia, and a number of other commodity exporters.
Oil prices are projected to increase gradually over the forecast horizon, from an average of about $35 a barrel in 2016 to $41 a barrel in 2017, the outlook says. In contrast, nonfuel commodity prices are expected to stabilize around recent levels.
“Geopolitical tensions are assumed to stay elevated in 2016, with the situation in Russia and Ukraine remaining difficult and strife continuing in some countries in the Middle East.”
Oil prices decreased further by 32 per cent between August 2015 and February 2016 on account of strong supply from members of the Organisation of the Petroleum Exporting Countries and Russia, expectations of higher supply from Iran, and concerns about the resilience of global demand and medium-term growth prospects.
Global financial conditions are assumed to remain broadly accommodative, but with some segments notably commodities and related industries and oil-exporting countries facing tighter financing conditions.
The process of monetary policy normalisation in the United States, the world’s largest economy, is assumed to proceed smoothly, without sharp movements in long-term interest rates.
The tightening of financial conditions for some emerging market economies over the past few months, with rising interest rate spreads and declining equity prices, is expected to persist.