Top Egyptian Company Sees Pakistan’s GDP Growth Dropping to 2.1% in FY23

Pakistan’s GDP growth is expected to slow down to 2.1 percent in the current fiscal year owing to challenging economic indicators and political uncertainty. Egyptian financial services company EFG Hermes in its report “Pakistan Economic Note” forecasts real GDP growth to slow to 2.1 percent in FY23, significantly down from 6.2 percent in FY22 with the potential for a mild recovery to 3.1 percent in FY24. The report indicated that the outlook for growth beyond the current fiscal year is primarily dependent on future political developments, which will determine the macro path. Growing political uncertainty is denting the country’s macro outlook, it stated. The company noted that Pakistan’s macroeconomic outlook remains hampered by political unrest that erupted early this year, following the ouster of former Prime Minister Imran Khan. Since then, the political environment has devolved into a deadlock, with the “cornered” ruling coalition facing an increasingly popular opposition. In addition to the challenging external financial environment, recent floods paint an unfavorable economic outlook. The company is confident that Pakistan will repay its $1 billion Sukuk next month, but cast reservations on the country’s $8 billion reserves that offer just 1.5 months’ worth of import cover. “In that respect, the macro sustainability really hinges on Pakistan’s ability to receive external support from friendly countries,” it said. The report sees the recent appointment of the new army chief to eventually pave the way for inflows, “though the outlook will remain uncertain in the near term”. Moreover, it sees the Pakistani rupee (PKR) remaining under pressure despite the recent drop in the current account deficit. “We project the current account deficit to narrow to 2.6% of GDP in FY23 with risks mainly tilted to the downside considering the abovementioned concerns,” it added. EFS Hermes took notice of the remittance drop in its findings and blamed it on informal channels which were offering better rates. It also sees food supply issues to keep inflation on the high, with rates averaging around 23.5 percent in the ongoing financial year.