Economic outlook
Like in many emerging market economies, the pandemic took a severe toll on Pakistan’s economy. After a 0.5% decline in real GDP in 2020, growth of 3.9% resumed in 2021, as fiscal and monetary stimulus, strong remittances and limited lockdowns lifted household consumption and private investment. The Pakistani economy is estimated to grow at 4% in 2022 according to IMF projections, benefitting from the resumption of IMF-led reforms that enhance export competitiveness and strengthen the financial performance of state-owned enterprises, particularly in the energy sector. On the downside, rising inflation and unemployment remain major hurdles to growth in economic activity and incomes.
Longer term, economic prospects remain robust. Infrastructure investments through projects in the CPEC and significant increases in power supply will help address some of Pakistan's economic constraints and strengthen its growth potential. The country’s young and growing population presents both opportunities and challenges. Adequate infrastructure, stable governance and productive investments will be needed to create employment opportunities. The IMF projects real GDP to expand between 4.5% to 5% per year on average over the next five years. But such prospects face downside risks from insufficient IMF-led reform progress, high debt constraining government spending, and instability in the political and security environment.
