ISLAMABAD – Fitch Solutions Macro Research, a unit of Fitch Group but anindependent research house, has maintained their forecast for Pakistan’sreal GDP growth to slow down to 4.4% in FY2018/19 (July-June), down from5.4% in the previous fiscal year, due to growing domestic and externalheadwinds.
Moreover, over the longer term, Fitch Solutions sees growing upside risksto their forecast for growth to come in at 4.1% in FY2019/20.
According to a recently published research, the economy will likely undergoa period of painful readjustment over the near term as Fitch Solutionsexpects both monetary and fiscal policy to be tightened to address many ofthe economic imbalances that have built up in recent years.
These imbalances include rising inflation, a widening fiscal deficit andfalling foreign exchange reserves.
Tighter monetary policy and a weak currency are likely to result in a lossin purchasing power among consumers. Meanwhile, austerity measures, risinggeopolitical tensions with the neighbor India and slowing global growthwill also pose headwinds to Pakistan’s growth outlook over the comingquarters.
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The increasing likelihood of a deal between Pakistan and the IMF would be apositive signal and could see growth surprise to the upside should furtherreforms be implemented to help reduce current imbalances and attract moreinvestment.
The report came amid regional tension between Pakistan and India whileinvestors have gone cautious in terms of business activities. The situationhas also unfolded adverse consequences for Indian economy.
