The Spokesman of Finance Division here on Sunday said that despite challenges Pakistan’s Economic Fundamentals remain strong. The early indicators of the economy such as strong growth of LSM sector during July- August, 2018, better crop production estimates and increasing exports, remittances and FDI all indicate towards improvements in macroeconomic conditions.
Rejecting the news item in a section of media, “Pakistan’s Macroeconomic conditions have significantly worsened” which is based on a World Bank report, he said the fact remains that “Pakistan Development Update” report is regularly published every 06 months by the World Bank. The assessment of the contributor of the news item is neither based on facts nor does it appropriately capture the assessment of the economy presented in the Bank’s report, which is balanced positively overall, and recognizes economic achievements of past 4 years.
The spokesman said the news item chooses to ignore the positive side of WB’s assessment which suggests that Pakistan has made good progress in making its economy more stable. To continue with an upward growth trajectory and sustain the hard earned achievements, Pakistan will need to continue with economic reforms and pursue pro-growth policies.
The WB’s report has highlighted that FDI has increased. Inflation is likely to increase on account of increase in aggregate demand and linked to bullish economic prospects. Likewise, the aggregate consumption will grow on account of recovery in remittances. Services sector will grow due to healthy contribution from its sub-sectors whereas industrial sector will continue to grow due to improved power supplies and CPEC. The agriculture sector will also expand .External public debt as percentage of GDP continues to decline; the official exchange rate remained stable in FY2017 and Credit to private sector picked up.
The report has, also pointed to challenges of ?scal and external imbalances, and stated that these could affect the country's growth prospects, if not addressed. The Government of Pakistan understands that these are mid-course corrections which are taking place in the macroeconomic framework while overall there is no reversal from the path of stabilization. The Government is aware of the challenges going forward and is firmly committed to maintaining macroeconomic stability while achieving pro-poor inclusive higher economic growth of 7 percent in the medium term.
An overview of macroeconomic indicators of the country clearly speaks of Pakistan’s economic resilience despite the slowdown in the global economy. Our current account deficit widened to US$12.1 billion during FY17 as compared to US$4.9 billion in FY16. However it was mainly due to increase in imports of machinery, industrial raw material and petroleum products. These imports enhance productive capacity of the economy for higher outputs and exports in future. Due to stabilizing security environment and un-interrupted power supplies, Pakistan’s export performance has returned to growth zone. Exports during July-September FY2018 posted a healthy growth of 12.4 percent as compared to the same period last year. Imports have started to taper off due to corrective measures of the government. Workers' remittances have also returned to growth zone. In July-October FY2018, workers' remittances have shown a growth of 2.3%. FDI inflow during July-October, FY 2018 has also registered a growth of 57%.
The recent pressure on external account is only short term and will peak out this year as various energy and infrastructure projects are completed. S&P has recently reaffirmed Pakistan 'B' short-term and long-term ratings with stable outlook. S&P has also acknowledged that Pakistan's external account challenges are short-term and will recede within two years' time.
The WB has assumed 5.5 % GDP growth for the current fiscal year, while GOP projected growth is 6%. The early indicators of the economy such as strong growth of LSM sector during July- August, 2018, better crop production estimates and increasing exports, remittances and FDI all indicate towards improvements in macroeconomic conditions, the spokesman concluded.