According to the UN World Economic Situation and Prospects 2024 report, the global economic growth is projected to slow down from an estimated 2.7 per cent in 2023 to 2.4 per cent in 2024.
Weakening worldwide trade, high borrowing costs, elevated public debt, persistently low investment, and mounting geopolitical tensions put worldwide growth at risk.
| Pakistan: Trends In Components Of Expenditure (% of GDP) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year | Total Expenditure | Current Expenditure | Markup Payments | Defence | Development Expenditure* | Non-Interest Non-Defence Exp | Fiscal Deficit | Revenue Deficit | Primary Balance |
| FY2016 | 17.7 | 14.3 | 3.9 | 2.3 | 4.0 | 11.5 | 4.1 | -0.8 | -0.3 |
| FY2017 | 19.1 | 14.6 | 3.8 | 2.5 | 4.8 | 12.8 | 5.2 | -0.7 | -1.4 |
| FY2018 | 19.1 | 14.9 | 3.8 | 2.6 | 4.0 | 12.7 | 5.8 | -1.6 | -1.9 |
| FY2019 | 19.1 | 16.2 | 4.8 | 2.6 | 2.7 | 11.7 | 7.9 | -5.0 | -3.1 |
| FY2020 | 20.3 | 17.9 | 5.5 | 2.6 | 2.4 | 12.2 | 7.1 | -4.8 | -1.6 |
| FY2021 | 18.5 | 16.3 | 4.9 | 2.4 | 2.2 | 11.2 | 6.1 | -3.9 | -1.2 |
| FY2022 | 20.0 | 17.3 | 4.8 | 2.1 | 2.4 | 13.1 | 7.9 | -5.2 | -3.1 |
| FY2023 B.E | 18.1 | 15.6 | 5.1 | 2.0 | 2.4 | 11.1 | 4.9 | -2.3 | 0.2 |
In 2024, the growth in various developed economies, mainly the United States, is projected to decelerate given high-interest rates, slowing consumer spending and weaker labour markets. The report also revealed that the short-term growth prospects for various developing countries, especially in East Asia, Western Asia, and Latin America and the Caribbean, are also deteriorating due to tighter financial conditions, shrinking fiscal space and sluggish external demand. Low-income and vulnerable economies are facing increasing balance-of-payments pressures and debt sustainability risks.
In particular economic prospects for small-island developing economies will be constrained by heavy debt burdens, high interest rates and increasing climate-related vulnerabilities.
International officials recorded in the report that the worldwide labour markets have seen an uneven recovery from the pandemic (Covid-19).
Despite a slowdown in growth, Labor markets in developed states have remained resilient. However, in many developing states, chiefly in Western Asia and Africa, key employment indicators are yet to return to pre-pandemic levels. The worldwide gender employment gap remains high, and gender pay gaps not only persist but have even widened in some occupations.
The report also outlines a nuanced economic outlook for our country-Pakistan, projecting a modest Gross Domestic Product (GDP) growth of 2.0 per cent in 2024 and a slightly enhanced 2.4 per cent in 2025. However, this trend is overshadowed by concerning indicators. Last year’s robust global economic recovery post-Covid, which contributed to GDP growth across the Globe, conceals latent risks and structural vulnerabilities in the global economy. According to the report, South Asia’s major economies, including Pakistan, India and Bangladesh, find themselves categorised as lower-middle-income states. It is said that the challenges persist, notably in food security despite the regional economic classification. Bangladesh and Pakistan in 2023 experienced a rise in people facing acute food insecurity, contrasting with Sri Lanka, where the condition enhanced.
It is also recorded in the report that Global inflation is projected to fall more, from an estimated 5.7 per cent in 2023 to 3.9 per cent in 2024.
However, price pressures are still elevated in various economies and any further escalation of geopolitical conflicts risks renewed rises in inflation. In about a quarter of all developing countries, yearly inflation in 2024 is projected to exceed 10 per cent.
Consumer prices in developing economies have increased by a cumulative 21.1 per cent since January 2021, significantly eroding the economic gains made following the Covid-19 recovery. Amid supply-side disruptions, conflicts and extreme weather events, in various developing economies local food price inflation remained high, disproportionately affecting the poorest households.
Statistics showed that Afghanistan remains the most adversely affected, with 46 per cent of its population facing acute food insecurity. The report digging deeper into Pakistan’s economic landscape, reveals alarming statistics. In 2023 the inflation rate skyrocketed to 39.18 per cent, prompting the State Bank of Pakistan (SBP) to maintain a record-high policy rate of 22 percent since June last year. Pakistan additionally, witnessed a depreciation of its currency by over 20 per cent in 2023. Pakistan furthermore, grapples with substantial sovereign debt and an unsustainable debt-servicing burden. External debt accounted for 36.5 per cent of Pakistan’s nominal GDP in 2023, a noticeable increase from the previous year. In 2022 the government debt-to-GDP ratio reached 89 per cent, underscoring the challenges of managing fiscal responsibilities. Statistics showed that real effective exchange rates, a broad measurement, fell from 88.0 in 2022 to 72 per cent in 2023. This index, calculated as a weighted average of bilateral exchange rates adjusted by relative consumer prices, reflects Pakistan’s economic problems.
Conclusion
The world, in a nutshell, is struggling to get back to the 3.0-per cent annual average from 2000 to 2019, showing years of sub-par growth. In this year, Pakistani policymakers must seize the opportunity to create a more inclusive, resilient worldwide economy that works for everyone, everywhere.