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I would like to share information from Global Economics Intelligence Executive Summary October 2023, presented by McKinsey. It is important to see where the world is going and where we are heading. This realization is even more important because we are so mired in self-created difficulties during the last few years that the common person has lost all sense of direction and rationality. Let us look at the report highlights first.
Global Outlook
- According to the International Monetary Fund’s October World Economic Outlook, global growth is forecast to slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024.
- Near-term inflation expectations have increased and, in turn could contribute to the persistence of core inflation pressures. Furthermore, more than half of low-income developing countries are in or at high risk of debt distress.
- There are mixed signals from global trade. Exports rose for Russia and the US but fell for Brazil, China, and the Eurozone; imports increased for Brazil, Russia, and the US, but fell for China.
- Overall, consumer confidence declined, primarily due to elevated interest rates… Confidence deteriorated in the Eurozone, the UK also saw steep decline. There, the cost-of-living crisis, a slowing job market, and the uncertainties posed by the conflict in the Middle East are contributing to a growing unease in consumer sentiment.
- The view is a bit more nuanced in India. The sales growth for September was 9% year-over-year, which suggests that consumer sentiment remains optimistic, despite economic uncertainties.
- The manufacturing sector has been in contraction for 13 consecutive months.
- The story for inflation is a bit more subtle. Headline inflation continues to decelerate, although there are countries where it increased, notably the US, primarily due to increased oil prices. Inflation expectations among most countries, however, remain stable and well anchored at around 2 to 3%. Core inflation, which excludes the most volatile prices such as food and energy, continued its downward trend around the globe and is approaching more comfortable levels.
- Brazil is the only country cutting down interest rates.
- Equity markets turned in a mixed performance in September, followed by declines across the board in October.
Major Economies
United States – Real GDP growth was forecast for October 2023 was 2.1% and for October 2024 is 1.1%. Labor market showed that only 150,000 jobs were added in October. The unemployment rate increased to 3.9% and the number of persons totaled 6.5 million.
United Kingdom – Growth is projected to decline from 4.1% in 2022 to 0.5% in 2023. According to OECD, the country’s GDP is expected to grow by a modest 0.3% in 2023 and 0.8% in 2024.
Eurozone – IMF’s October projections show annual average real GDP growth is expected to slow from 3.4% in 2022 to 0.7% in 2023 and then recover to 1.2% in 2024.
China – GDP growth in the third quarter slowed to 4.9% year-over-year, compared to 6.3% in the second quarter. By sector, GDP growth accelerated in the agriculture sector and slowed down in the industrial and services sector.
India – In the second quarter of 2023, India’s economic activity index nowcasts GDP growth of 6.8%; industrial production has been relatively positive. Manufacturing further expanded by 1.6% and electricity saw an increase of 8.1%. Growth forecast for 2024 is 6.3%.
Brazil – Inflation continued to rise for the third consecutive month, coming in at 5.19%. inflation for food continued to slow, given strong agricultural harvests.
Russia – Headline inflation reached 6% in September. New forecasts see the country’s economy growing by 0.5 – 1.5%. By contrast, import and export trends caused the goods trade surplus to expand to $11.3billion.
India is doing the best among this list. Their growth is robust, inflation is controlled, and economy is growing in all sectors.
Pakistan
The report referred above does not include Pakistan because we are such a small economy, and not worth considering. Gathering information from several other sources, the following picture emerges.
Bloomberg reported, “Pakistan economic growth slowed sharply to one of the lowest levels in its history as it woes intensify amid record inflation and interest rates. The National Accounts Committee reported GDP growth provisionally at 0.29%”.
World Bank reported in October 2023, “Pakistan’s economy slowed sharply in FY23 with real GDP estimated to have contracted by 0.6%. According to the latest update, the decline in economic activity reflects the cumulation of domestic and external shocks including the floods of 2022, government restrictions on imports and capital flows, domestic political uncertainty, surging world commodity prices, and tighter global financing. The poverty headcount is estimated to have reached 39.4% in FY23, with 12.5 million more Pakistanis falling below the Lower-Middle Income Country poverty threshold (US$3.65/day 2017 PPP per capita) relative to 34.2% in FY22. Careful economic management and deep structural reforms will be required to ensure macroeconomic stability and growth. With inflation at record highs, rising electricity prices, severe climate shocks, and insufficient public resources to finance human development investments and climate adaptation, it is imperative that critical reforms are undertaken to build the fiscal space and public means to invest into inclusive, sustainable, and climate-resilient development”.
United States Institute of Peace says in its report, “In the first half of 2023, Pakistan appeared to be moving toward a catastrophic economic default. An IMF loan program Pakistan entered into in 2019 had gone off track after the Fund found Islamabad’s commitment to reform lacking, leading to a suspension of loan disbursements. The derailment of the IMF program resulted in a significant drop in the country’s foreign exchange reserves — at one point this year, reserves could only cover about two weeks’ worth of imports due to concurrent debt repayment pressure. To avoid defaulting, the government imposed stringent import restrictions in an attempt to control dollar outflows. That caused a major economic shutdown of import-dependent industries, a shortage of essential commodities and surge in inflation. Yet by late June the Pakistani government had managed something of a turn-around. The IMF announced a new nine-month program with a $3 billion Stand By Arrangement (SBA) as an emergency stop-gap measure. Economic support also came from Pakistan’s Middle East partners and China. Although the risk of default has since receded, significant economic challenges remain for Pakistan, including forthcoming negotiations with the IMF and seeking additional aid from foreign backers, particularly Saudi Arabia and the UAE”.
Sum Up
Pakistan has been economically, diplomatically, socially, and politically, has descended down to unprecedented lows. Coming up from this position will require high caliber, moral authority, integrity, commitment, and consistency.
Concluded.
References:
https://www.worldbank.org/en/news/press-release/2023/10/02/fiscal-reforms-are-critical-for-economic-stability-sustainable-growth-in-pakistanhttps://www.usip.org/publications/2023/09/promise-and-peril-pakistans-economic-recovery-effort
