The World Bank expects the Pakistani economy to grow by just 0.6 percent in fiscal year 2016, slower than the previous

Key Highlights :

1. Pakistan's growth is expected to slow significantly in the current fiscal year in the wake of last year's devastating floods, ballooning inflation, a current account deficit, and an ongoing foreign exchange crisis.

2. Growth is forecast to rise to 2 percent in the next fiscal year (FY2024), assuming the resumption of macroeconomic stability, implementation of reforms, post-flood recovery, and improving external conditions.

3. A return to political stability with the formation of a new government after scheduled general elections would improve business sentiment.

4. Increased government spending to support relief, recovery, and rehabilitation in the aftermath of the floods is expected to compensate for some of the damage and disruption to economic activity during the first half of the fiscal year.

5. The ADB has warned that average inflation is projected to more than double from 12.2 percent in FY2022 to 27.5 percent. It stated that headline consumer inflation jumped to 25.4 percent in the first 7 months of the fiscal year on high­er domestic energy prices, a weak­er currency, flood-related supply disruption, and restraint on im­ports caused by a serious crisis in the balance of payments.

6. Headline inflation is expected to de­crease to 15.0 percent in FY2024 as global energy prices decline and flood-induced supply con­straints are resolved, as well as from a high base effect.

7. The cen­tral bank tightened monetary pol­icy further in response to rising in­flation and external imbalances, raising the policy rate by another 200 basis points in the first half of FY2023 to 17.0percent in January 2023, which was still below the in­flation rate.

8. On 2 March 2023, the central bank increased its policy rate by a further 300 basis points to 20.0percent to tackle inflation.

     Islamabad, Pakistan - The Asian Development Bank (ADB) on Tuesday noted that Pakistan’s economic growth is expected to slow significantly in the current fiscal year in the wake of last year’s devastating floods, ballooning inflation, a current account deficit, and an ongoing foreign exchange crisis.

     ADB’s latest Regional Economic Outlook report projects Pakistan’s GDP growth to slow to 3.5 percent in fiscal year 2018/19 from 4.1 percent in fiscal year 2017/18. The slowdown is largely attributable to the impact of the floods, which caused losses of $14.5 billion and affected more than 20 million people.

     “The floods have had a significant negative impact on the country’s economy,” said ADB Country Director for Pakistan, Mohammad Asim. “The government has taken a number of measures to support the economy, including increasing public spending, but the recovery will be slow.”

     The current account deficit is also expected to widen in fiscal year 2018/19, reaching $10.5 billion from $5.5 billion in fiscal year 2017/18. The increase is attributable to higher imports, reflecting the impact of the floods and the weak global economy.

     Inflation is also expected to rise, reaching 10.5 percent in fiscal year 2018/19 from 9.2 percent in fiscal year 2017/18. The increase is primarily due to higher food prices.

     The foreign exchange crisis is also likely to continue, with the rupee losing more than 20 percent of its value against the US dollar since last year. This has led to a sharp increase in import prices and a decline in exports.

     “The government will need to take additional measures to support the economy, including through fiscal and monetary policy reforms,” said Asim.

     Pakistan’s economy is still vulnerable to external shocks, and the government will need to take additional measures to prevent a further deterioration in the economy.

Continue Reading at Source : nation_pk