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SBP projects GDP growth to remain between at 3-4%

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2 years ago

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  • SBP says economy will grow at slower pace.
  • Economy had expanded by 6% during last fiscal year. 
  • SBP had already cut the economic growth to about 2%.

KARACHI: The State Bank of Pakistan (SBP) on Wednesday projected that Pakistan’s economy will grow at a slower pace in the ongoing fiscal year compared to what was predicted a few months ago due to the catastrophic flood losses and falling demand, and as high interest rates, reported The News.

“Taking into account the destruction caused by floods and the policy focus on stabilisation, the SBP projects real GDP [Gross Domestic Product] growth below the previously announced range of 3-4% for FY-2023,” said the central bank in its annual report on the State of Pakistan’s Economy for the fiscal year 2021/22.

The economy had expanded by 6% during the last fiscal year. The SBP had already cut the economic growth to about 2% in its monetary policy statement in October.

The SBP’s growth projection was not only based on flood-related fallout on the economy, which is anticipated to affect the real economic activity through a variety of channels and have a considerable negative impact on output.

The country’s economy was given dim predictions by international financial institutions as well. The World Bank predicts that this fiscal year’s GDP growth would be 2.2%. The country’s GDP was projected by the International Monetary Fund to grow by 3.5% without taking the impacts of the floods into account.

The central bank’s economic report card for FY-2022 was released amid a balance of payments crisis. 

Pakistan severely needs external financing while the IMF’s ninth review has been pending since September. The forex reserves have fallen to $6.7 billion, hardly enough for a month’s worth of imports.

On inflation, the central bank has projected that the prices would go beyond the previously announced range of 18-20% during the ongoing fiscal. The consumer price index inflation is expected to be in the 21-23 range, according to its last monetary policy statement.

“Supply shocks in the form of the rollback of energy subsidies and resumption of fuel taxation and losses to agriculture produce caused by floods are likely to influence the inflation trajectory during the year. The elimination of subsidies and increase in fuel taxation triggered a sharp increase in inflation since June 2022, and the trend is likely to persist in FY2023,” it said in the report.

The coordinated fiscal and monetary policy stance is likely to reduce external account pressures in FY2023. 

The SBP sees the current account deficit to be around 3% of GDP. This improvement would be driven by a sizeable contraction in import growth. 

Likewise, global commodity prices have also started to soften after reaching multiyear peaks in FY-2022, which will reduce the pressure caused by a large price impact, it said.

However, the downturn in global demand may also weaken the growth of exports, and the tightening of policies in advanced economies would lessen the likelihood of capital flows to emerging and developing economies.

After seeing a surge in FY-2021, the workers’ remittances seem to have peaked in FY-2022 and are probably going to stay at a similar level in FY-2023, it noted.

“Alongside the IMF programme disbursements, the country is expected to receive external financing from multilateral and bilateral creditors that will considerably strengthen FX reserves position during FY2023.”

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The PSX has resumed operations, achieving a gain of 970 points.

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11 hours ago

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The optimistic close at the PSX was propelled by rumors preceding the International Monetary Fund (IMF) executive board meeting on September 25, at which the approval of a $7 billion Extended Fund Facility (EFF) is expected, stated Ahsan Mehanti of Arif Habib Commodities.

Strong economic indicators, such as increasing remittances, escalating exports, and a declining trade deficit, further bolstered investor confidence. Furthermore, the Asian Development Bank’s (ADB) commitment to a $2 billion yearly concessional loan until 2027, along with a robust rupee, significantly contributed to the market’s favorable performance, he stated.

Widespread purchasing at the PSX was noted among blue-chip stocks, with major players like Mari Petroleum (MARI), Engro Fertilizers (EFERT), United Bank Limited (UBL), Meezan Bank Limited (MEBL), and Fauji Fertilizer Company (FFC) recording substantial increases. According to Topline Securities, these stocks collectively resulted in a significant 682-point increase in the index.

Pioneer Cement Limited (PIOC) announced its fiscal year 2024 results, revealing a profits per share (EPS) of Rs 22.79 and a cash dividend of Rs 10 per share. This announcement contributed to the favorable sentiment in the market.

Trading volume surpassed 400.2 million shares, resulting in a total turnover of Rs15.9 billion. Worldcall Telecom Limited (WTL) topped the volume chart, transacting more than 32.2 million shares.

The Large Scale Manufacturing Index (LSMI) demonstrated a year-on-year (YoY) gain of 2.4% in July 2024. This expansion was propelled by multiple critical areas.

Tobacco experienced a significant increase of 90.2%, establishing it as the foremost contributor to the LSMI growth. Conversely, the automotive sector witnessed a substantial increase of 72.0%, indicating robust demand and output.

The transport equipment category experienced an 11.7% increase, signifying robust growth in the manufacturing of transport-related machinery and equipment. The other manufacturing sector experienced a gain of 10.7%, positively impacting the overall LSMI.

Nevertheless, not all industries exhibited strong performance. The leading decliner was the fabricated metal sector, which experienced an 18.4% decrease, signifying a contraction in metal product manufacturing. The electrical equipment industry experienced a substantial decline of 19.4%, indicative of reduced output levels.

In July 2024, the LSMI decreased by 2.1% on a month-on-month (MoM) basis. This fall signifies a minor contraction in manufacturing operations relative to the preceding month, although the favorable year-on-year growth.

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As of August 2024, Pakistan’s current account is in surplus.

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11 hours ago

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Pakistan’s current account deficit was $161 million as of August 2023, according to figures from the central bank.

The current account deficit for the months of July and August of this year was $171 million, compared to $939 million for the same time in the previous fiscal year.

According to experts, the 40% rise in remittances is the primary cause of the current account surplus.

August saw US$ 2.9 billion in offshore remittances to Pakistan, according to experts.

Comparing July of this year to July of last year, total exports increased by 11.3% YoY to $3.01 billion. In contrast to the $3.08 billion in exports the month before, it decreased by 2.2%.

Compared to the $4.99 billion in imports recorded in July of previous year, total imports increased 12.2% YoY to $5.6 billion. Imports decreased by 1.3% over the previous month.

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Islamic Sukuk Bonds: Government Is Expected To Begin Bond Auction Next Week

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6 days ago

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There is now more positive economic news for the people of Pakistan. The government is anticipated to begin the Sukuk Islamic Bond auction next week, after the central bank’s announcement of a large drop in the policy rate.

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