IMF cuts Pakistan growth forecast for 2013, 2014

Published: October 8, 2013
IMF warns the outlook for global economy could get bleaker if the US political standoff over finances drags on. PHOTO: REUTERS

IMF warns the outlook for global economy could get bleaker if the US political standoff over finances drags on. PHOTO: REUTERS

WASHINGTON: The International Monetary Fund on Tuesday lowered its growth forecast for Pakistan and the global economy and warned the outlook could get bleaker if the US political standoff over finances drags on.

The Pakistani economy is expected grow 2.3 per cent year-over-year in 2013 and 3.6 per cent in 2014, the IMF said, revising July estimates down by 0.7 and 0.1 percentage points per year, respectively.

The global economy’s growth percentages were also revised downwards with estimates being brought down by 0.3 and 0.2 percentage points.

Four years after the Great Recession ended, “global growth remains in low gear,” the IMF said in its World Economic Outlook report.

Advanced economies, in particular the United States, are showing signs of pick-up, while emerging-market (EM) economies, although still accounting for most global growth, are losing more momentum than previously thought, the IMF said.

“Global growth is still weak, its underlying dynamics are changing, and the risks to the forecast remain to the downside,” the IMF said.

Two risks were a particular worry, it pointed out the US Federal Reserve’s plan to exit the exceptionally easy-money policy it has pursued to pull away from the brink of depression, and China’s slowing growth.

IMF said that financial markets were growing convinced that loose US monetary policy was reaching a “turning point” after Fed officials started talking in May about tapering their program of $85 billion a month on asset purchases, known as quantitative easing.

Though the Fed has yet to begin to taper, the mere talk of tapering QE led to an unexpectedly large increase in long-term yields in the United States and many other economies, slowing capital inflows to emerging-market economies, it said.

As for China, it appears increasingly likely that the world’s second-largest economy will grow more slowly over the medium term than in the recent past, a prospect especially affecting the commodity exporters among the emerging and developing economies.

Overall, the IMF left unchanged its gross domestic product (GDP) growth forecasts for the advanced economies, at 1.2 per cent in 2013 and 2.0 per cent in 2014.

In the US, growth in the world’s largest economy would tick along at 1.6 per cent in 2013, picking up to a 2.6 per cent pace next year, slightly less activity than the IMF projected in July.

“At the time of writing, a political standoff in the United States has led to a shutdown of its federal government. The projections assume that the shutdown is short, discretionary public spending is approved and executed as assumed in the forecast, and the debt ceiling – which may be reached by mid-October – is raised promptly,” the IMF said.

“While the damage to the US economy from a short shutdown is likely to be limited, a longer shutdown could be quite harmful. And, even more importantly, a failure to promptly raise the debt ceiling, leading to a US selective default, could seriously damage the global economy.”

The IMF said the eurozone’s recession this year would not be quite so deep, a 0.4 per cent contraction, a 0.1 percentage point improvement from its July forecast. The European single-currency bloc is expected to return to growth next year, albeit at a tepid 1.0 per cent annual rate.

Japan, battling years of deflation and stagnation, is showing an “impressive pickup” in growth thanks to the Bank of Japan’s easing policies and the government’s stimulus, the IMF said.

It estimates the new policies may have boosted GDP by about 1.0 per cent. In minor revisions, the Fund predicts the world’s third-largest economy will grow 2.0 per cent in 2013, but slow to 1.2 per cent in 2014 under pressure from tightening fiscal policy.

Growth forecasts for China were lowered a few tenths of a point for both years, to 7.6 percent in 2013 and 7.3 percent in 2014.

Estimates for India and Mexico growth were slashed the most, down by 1.8 points and 1.7 points for 2013, to 3.8 per cent and 1.2 per cent, respectively.

Growth in Brazil was projected at 2.5 per cent for both years, but the 2014 number was lowered by 0.7 point.

Slowdowns in China, India and Brazil have been largely responsible for the downgrade on growth in emerging market and developing economies. The IMF cut about half a point off its July update for that group of economies, to 4.5 per cent in 2013 and 5.1 per cent in 2014.
Russia took a one-point hit, with GDP expected to expand only 1.5 percent this year, before picking up to 3.0 per cent.

Growth for the group combining the Middle East, North Africa, Afghanistan and Pakistan was lowered to 2.3 per cent this year, while Sub-Saharan Africa would see it slip to 5.0 per cent.

The IMF cautioned that the end of US quantitative easing could result in a greater and longer-lasting tightening of global financial conditions than currently expected, putting brakes on growth.

“What is more worrisome, monetary policy in the advanced economies could be stuck at the zero-interest bound for many years.

Over time, worrisomely high public debt in all major advanced economies and persistent financial fragmentation in the euro area could then trigger new crises.”

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Reader Comments (25)

  • Zain
    Oct 8, 2013 - 8:50PM

    Blame it on CIA, Mosad and RAW.


  • raj
    Oct 8, 2013 - 9:21PM

    wish that IMF is wrong and world economy bounces back soon…..hmph


  • Syed A. Mateen
    Oct 8, 2013 - 10:05PM

    In simple words the “United States of Europe” (Euro) is giving tough time to “United States of America” (US$) and that is why IMF indicators are showing negative trends.

    The overall economy of the world can be improved, provided there is a peace, but who will provide complete peace in the world is again a million dollars question.


  • Someone
    Oct 8, 2013 - 11:17PM

    @Zain: Estimates for India and Mexico growth were slashed the most, down by 1.8 points and 1.7 points for 2013, to 3.8 per cent and 1.2 per cent, respectively.

    Have popcorn and enjoy. No ISI conspiracy.


  • Asif Mir Kashmiri
    Oct 8, 2013 - 11:18PM

    We Kashmiris want freedom from India, we do not want to stay with poverty country India.


  • Siddiqui
    Oct 8, 2013 - 11:32PM

    Pakistan economy still growing in 2013 at 2.3 percent, and expected to grow at a rate of 3.6 percent next year…quite incredible. Seems like ‘ It is the best of times…It is the worst of times.


  • Dj
    Oct 8, 2013 - 11:37PM

    Growth lol look at who the PM is.


  • BCCI
    Oct 8, 2013 - 11:54PM

    @Asif Mir Kashmiri:
    More than welcome to cross the border into your ‘garden of eden’. Careful at the mosques though, BOOM!!! and poof, there you go..


  • meekal ahmed
    Oct 9, 2013 - 12:58AM

    A growth forecast is just that. A forecast with certain assumptions that may turn out to be right or wrong.

    The IMF report does show growth accelerating over the next three years but we will still not be at 7% which economists think is our “potential”. But even the gradual acceleration assumes that certain key structural reform measures (most importantly in the energy sector) will be implemented and bear fruit.

    If not, we will continue to grow well below our potential as we have been for the past five years.


  • rome
    Oct 9, 2013 - 2:11AM

    BCCI: Asif Mir Kashmiri is not talking abt crossing the border but abt making India kashmir to the muslims area. why are you commenting if you dont understand English, thats why you did not get his point.


  • salman
    Oct 9, 2013 - 3:23AM

    Dont worry folks. Pmln has the best economic team in the world. Pretty soon we will be experiencing double digit growth. Go sher! Go mian sahib!


  • Curious
    Oct 9, 2013 - 5:07AM


    Here is the link to the whole IMF transcript from the IMF website itself:

    For India, our forecast for FY2013 is for growth to average around 3.8 percent, and this is in market prices, and it will gradually pick up to 5.1 percent next year. …..But having said that, more recently the exchange rate has depreciated significantly in real effective terms, and agricultural production is also undergoing a strong rebound. So, built on these factors and high-frequency indicators show that even investment growth is picking up, we expect growth to pick up next year.

    What are you going to do now? Blow up somewhere :-(


  • IndianDude
    Oct 9, 2013 - 5:12AM

    @Asif Mir Kashmiri
    “..We Kashmiris want freedom from India, we do not want to stay with poverty country India…”
    That is very easily done, just walk across the LOC to the land of pure.
    P.S. Make sure you are not a shia like hundereds of thousands of kashmiri muslims.


  • el chor
    Oct 9, 2013 - 5:56AM

    @Asif Mir Kashmiri:
    Merge Kashmir to FATA, that will make you rich.


  • el chor
    Oct 9, 2013 - 5:57AM

    from the 9% growth rate!!!
    enjoy your chai paape


  • Cosmo
    Oct 9, 2013 - 6:19AM

    @Asif Mir Kashmiri:
    When pakistanis like u hate their own identity, they call themselves Kashmiri and Arabs. U guys will never change, while India may b poor buy they are proude of their identity.
    Palistan and identity crises go hand in hand!!


  • Oct 9, 2013 - 7:47AM

    IMF saw 2013 world growth at 4.1% when the S&P500 was at 1,400 and now that it sees 2013 growth at the lowest ever in the series, 2.9%, when the S&P500 is just a whisker off its all time high is without comment.

    Just plot growth forecast by IMF and reality for countries’ growth and world trade volume on actual growth and then prepare to laugh out loud.

    In shorter words, “IMF is clueless”.


  • Mohammed Yusuf
    Oct 9, 2013 - 7:52AM

    @Asif Mir Kashmiri:
    Brother, one-third of your Kashmir is with Pakistan and a part of it is with China. Which part of Kashmir you want to be free?


  • Asif Mir Kashmiri
    Oct 9, 2013 - 8:47AM

    @IndianDude: Kashmir is not part of the India. Kashmir is my land, all Indians need to get out of my land. Kashmir need freedom from India


  • Virkaul
    Oct 9, 2013 - 9:24AM

    @rome: We all understand English, Sir. No one is talking Italian here (Nessuno parla Italiano qui). BCCI gave a good suggestion to Mir Kashmiri, if you don’t like it in this part of Kashmir, you are free to cross over to the Jannah across the LOC. Life is full of fun there.


  • Indian
    Oct 9, 2013 - 4:32PM

    India’s exports grew 11.15 per cent in September and imports declined 18.1 per cent amid a sharp fall in inward shipments of gold and silver, taking the trade deficit to the lowest level in 30 months.

    Exports last month climbed to USD 27.68 billion, while imports stood at USD 34.4 billion, narrowing the trade gap to USD 6.76 billion.

    “The trade deficit during the month was the lowest since March 2011.Recommend

  • RAW is WAR
    Oct 9, 2013 - 5:43PM

    @Asif Mir Kashmiri:

    Kashmir belongs to India. You can find a rich country if you like.


  • IndianDude
    Oct 9, 2013 - 8:31PM

    @Asif Mir Kashmiri
    [email protected]: Kashmir is not part of the India. Kashmir is my land, all Indians need to get out of my land. Kashmir need freedom from India..”
    Nope, kashmir is the land of my forefathers, the pandits, who you had terrorized and are forced to leave as refugees in their own countries, away from their homeland. The kashmiri terrorist thugs backed by pakistani have occupied all the land and businesses owned by them. Pandits owned most of the land and businesses in the valley, muslims were mostly working for the pandits and the sikhs. But as a self-proclaimed kashmiri from pakistan, you already know all these don’t you?


  • Indian
    Oct 10, 2013 - 1:02PM

    @Asif Mir Kashmiri
    kashmir is and will remain integral part of india, if you have problem you can go into “pakistan occupied kashmir”.
    But we well take back it soon.


  • Peace with ISI
    Nov 1, 2013 - 9:26PM

    @ indian
    if you Indians cannot win hearts of Muslims lived in occupied Kashmir don’t even think about Azad Kashmir.
    Pakistan ZindabadRecommend

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