The board of directors of the National Bank of Pakistan (NBP) has said thatthe economic outlook of the country will be shaped largely by therestoration of political stability.
The NBP — the government-owned commercial bank — in its outlook said thatamid the devastating floods, policy tightening and critical efforts totackle sizeable fiscal and external imbalances, Pakistan’s economy isforecast to slow down in the current fiscal year ending June 30, 2023.
“The economic outlook will be shaped largely by the restoration ofpolitical stability and the continued implementation of reforms under therevived International Monetary Fund (IMF) programme to stabilise theeconomy and restore fiscal and external buffers,” according to the board ofdirectors.
Rehmat Ali Hasnie, president and chief executive officer (CEO) of the bankon behalf of the board of directors presented the country’s economicenvironment.
The global economy remains confronted with slowing growth, highinflationary pressure and geopolitical unrest, he said, adding that in mostcountries, the central banks are responding aggressively, leading toexchange rate depreciation pressure on most emerging market currencies.
According to him, Pakistan’s economy is facing deceleration due to multiplefactors.
“The economic and fiscal outlook has deteriorated significantly with thecatastrophic floods, as agricultural output of major crops is expected todecline shortly,” Hasnie said.
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The economy has slowed down considerably, as most large-scale manufacturing(LSM) indicators were lower in July and August, compared with the sameperiod of the last year.
Based on the currently available information, the GDP growth could fall toaround 2 per cent in the current fiscal year, compared with the previousforecast of 3 to 4 per cent before the floods.
Meanwhile, higher food prices could raise the average headline inflation inthe current fiscal year somewhat above the pre-flood projection of 18 to 20per cent. Amid these challenges, the headline inflation fell last month dueto an administrative cut in the electricity tariff.
“The current account and trade deficits also narrowed in August andSeptember, respectively, and the rupee has recouped some of its losses;following the recent depreciation,” he said. The combined 7th and 8threview under the ongoing IMF programme was successfully completed on August29, releasing a tranche of $1.2 billion, he noted.