Global downturn


The world economy is collectively in a gloomy zone. It seems to be on the brink of another recession. And Pakistan, of course, is no exception as the World Bank’s latest report has forecasted its real GDP to grow at 2.0% in the fiscal year 2022-23. This means it is on a slippery path to its earlier projection of around 3.5%, and a devastating blow as compared to previous year’s growth of around 5%. The prime reasons for the sluggish projections are a steep rise in inflation and interest rates, the weakening rupee and food supply chain disruption owing to the war in Ukraine.

Pakistan’s woes are, nevertheless, unending. It faces a serious foreign exchange crunch as reserves slump below $5 billion and witnesses a rise in fiscal and current account deficits in the wake of the devastating monsoon floods last summer, rendering it a blow of around $18 billion in losses. How the fragile and resource-starved economy limps back to normalcy is hard to project, as it primarily focuses on avoiding an imminent default on its sovereign liabilities at the international front. Last but not least, degenerating exports and cost of debt-servicing have put it in a tight container, literally unable to breathe despite pledges of around $8 billion at the Geneva climate conference.

The World Bank’s report, ‘Global Economic Prospect’, is an eye-opener for both the developed and the developing economies. It unequivocally points out at a “sharp, long-lasting slowdown” with growth pegged at 1.7%. In other words, the world economy has never been so jittery since the Arab-Israel oil crisis in 1973, or even the banks-borne financial crisis in 2009. The ongoing turmoil in Ukraine has pushed back even the bitterness of Covid-19, and the world is at the cliff of either tightening its belt or perishing. The scenario is nightmarish as the US growth will see a downturn of 0.5%, European economies wayward, and China taking a downward bite of 0.9 points lower than its earlier forecast. This entails collective wisdom on global resources, but is anybody listening to it?

Published in The Express Tribune, January 12th, 2023.

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