Inflation is expected to rise moderately to about 2.8 per cent, but remains contained, it noted.
Fiscal policy should provide temporary and targeted support to vulnerable households and firms affected by the shocks, while a medium-term consolidation led by a credible revenue mobilisation strategy is needed to rebuild fiscal buffers, it noted.
Monetary and financial policies should focus on safeguarding financial stability, the IMF said after concluding its 2025 Article IV consultation with the country recently.
Accelerating structural reforms is crucial to diversify growth-drivers, improve competitiveness, and make the economy more resilient to shocks, it said in a release.
Enhancing business environment, strengthening governance and investing in human capital will support sustainable and inclusive long-term growth, it observed.
Domestic financial sector vulnerabilities are a key concern. High private sector debt and rising non-performing assets, which have surpassed 7 per cent, could lead to corporate and household financial stress and weigh on the recovery.
On the upside, successful reintegration of returning workers into the domestic labour force could support consumption and mitigate some of the adverse growth effects, the IMF added.
ALCHEMPro News Desk (DS)
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