According to the United Nations’ mid-year survey on the world economic situation, Pakistan is expected to face continued double-digit inflation in the coming months due to a weakening local currency and supply-side constraints.
?The survey, released by the UN Department of Social Affairs, highlights that domestic food inflation remains high, posing challenges to food security in the South Asian region, particularly in Afghanistan, Bangladesh, and Pakistan.
The UN survey also reveals that high inflation, tighter financial conditions, weaker private consumption, and external imbalances will continue to impact growth in 2023.
?The region’s vulnerability to extreme climate conditions, including potential droughts and floods, further adds to the economic risks.
For South Asia, the projected economic growth is 4.7% in 2023 and 5.8% in 2024, slightly lower than the January forecasts. The survey forecasts regional consumer price inflation to average 11% in 2023 and 9.4% in 2024, a slight decrease from the 2022 figure of 12.9%.
To tackle inflation and stabilize exchange rates, central banks in the region have implemented interest rate hikes in early 2023.
The survey paints a somber global economic outlook, with concerns about stubborn inflation, rising interest rates, and uncertainties. Lingering effects of the COVID-19 pandemic, the worsening impact of climate change, and unaddressed macroeconomic structural challenges pose risks for a prolonged period of low growth.
The global economic growth forecast for 2023 is 2.3%, with a slight uptick from previous estimates. The United States sees an upward revision to 1.1% growth in 2023 due to resilient household spending.
?The European Union’s economy is projected to grow by 0.9%, driven by lower gas prices and robust consumer spending. China’s growth is forecast at 5.3% this year as COVID-19 restrictions are lifted.
Despite these revisions, global growth remains below the pre-pandemic average, and many developing countries face deteriorating growth prospects due to tightening credit conditions and rising external financing costs.