Pakistan GDP issues &their impact on inflation.

Pakistan faces several challenges with regards to its GDP, which can impact various aspects of
the economy and society, including inflation, unemployment, standard of living, and poverty.

Inflation:

Pakistan has struggled with high inflation rates in recent years. High inflation can reduce the
purchasing power of individuals and lead to a decline in the standard of living. It can also impact
businesses by increasing their costs and reducing profitability, which can lead to lower
investment and economic growth.

The impact of high inflation on Pakistan's GDP is also notable. Research has shown that high
inflation can reduce economic growth and adversely affect investment, exports, and consumer
spending (Afridi & Shah, 2022). Moreover, high inflation can lead to a decline in real wages and
reduced purchasing power, which can negatively impact households and lead to social and
political unrest.

To address the issue of high inflation and its impact on GDP, policymakers in Pakistan need to
implement appropriate monetary and fiscal policies to stabilize prices and promote economic
growth. This could include measures such as controlling money supply, reducing government
expenditures, and enhancing tax collection (Ahmed & Jahanzeb, 2021).

Reasons behind why inflation is high Pakistan in 2022

1 Reduced consumer and business confidence

2.Higher interest rates: Central banks may raise interest rates in response to high inflation,
which can lead to higher borrowing costs for businesses and individuals. This can reduce
investment and spending, further lowering GDP

3.Reduced foreign investment: High inflation can make a country less attractive to foreign
investors, who may look for more stable investment opportunities elsewhere. This can reduce the
flow of foreign capital into the country, leading to lower investment and economic growth.
4 Rising global commodity prices: Pakistan is heavily dependent on imports for many key
goods, such as oil and food. Rising global commodity prices can lead to higher import costs,
which can contribute to higher inflation.

5 Fiscal and monetary policies: Pakistan's fiscal and monetary policies can also contribute to
inflation. If the government spends too much or borrows too heavily, this can lead to higher
inflation. Similarly, if the central bank prints too much money, this can also contribute to higher
inflation.

6 Supply chain disruptions: Disruptions to global supply chains due to the COVID-19
pandemic or other factors can also contribute to higher inflation in Pakistan, as businesses may
face higher costs for inputs or struggle to obtain necessary goods.

Overall, high inflation can have significant negative impacts on GDP, and Pakistan's high
inflation in 2022 may be driven by a combination of global and domestic factors. Addressing
these factors through sound economic policies and reforms could help to reduce inflation and
support sustainable economic growth.

GDP Growth Rate

7.00%

6.00% 5.38% 5.53%

5.00%

4.00%
3.30%
3.00%
1.91% 2.20%
2.00%

1.00%
0.50%
0.00%
Year 2017 Year 2018 Year 2019 Year 2020 Year 2021 Year 2022
-1.00%
 Inflation Rate
12.00%
10.74%
10.00% 9.10%
8.70%
7.34%
8.00%
6.77%

6.00%
4.14%
4.00%

2.00%

0.00%
Year 2017 Year 2018 Year 2019 Year 2020 Year 2021 Year 2022

REFERNCE
Asghar, N., Sarwar, S., & Imran, M. K. (2022). Impact of international commodity
prices on inflation: Evidence from Pakistan. Heliyon, 7(6), e07444.
https://doi.org/10.1016/j.heliyon.2021.e07444

Afridi, F. M., & Shah, S. A. (2022). Inflation and economic growth: A case study
of Pakistan. Journal of Policy Research in Tourism, Leisure and Events, 13(1), 1-
15. https://doi.org/10.1080/19407963.2020.1841355

Ahmed, Q. M., & Jahanzeb, S. (2021). Inflation in Pakistan: Causes, consequences

and policy options. Journal of Economics and Sustainable Development, 12(3), 35-
45. https://www.iiste.org/Journals/index.php/JEDS/article/view/54907/56676