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Sunday, May 19, 2024

Pakistan’s economic growth to pick up pace in FY23?

Growth is expected to accelerate to 4. 5% in FY2023 due to stronger private consumption and investment.

A report by Asian Development Bank (ADB) has stated that Pakistan’s economic growth will accelerate to 4. 5% in FY2023. However, before that, Pakistan’s economic growth will slow down briefly.

According to the Asian Development Outlook (ADO) 2022, ADB’s annual flagship economic publication, Pakistan’s gross domestic product (GDP) growth will slow to 4% in FY2022 from 5.6% in FY2021 as the government applies measures to reduce the current account deficit, raise international reserves, and cut inflation.

The economic growth will decelerate due to the depreciation of the local currency, and upward adjustments to domestic oil and electricity prices. Important to note, the year 2022 faced a record increase in international prices of oil due to the Russia-Ukraine war. The war disrupted the oil supplies.

This put Pakistan- an oil-importing country- in a tough spot. However, the government, despite increasing oil prices globally, has kept the price of petrol unchanged in the range of PKR 150 per liter.

Read more: Ukrainian helicopters attack oil depot in Russia

Moreover, the Pakistani currency dropped 0.62% (or Rs1.14) to a new historic low beyond the important threshold of Rs. 185 against the US dollar in the inter-bank market on Tuesday.

Regarding this, the ADB article notes that while inflation declined to 8.9% in FY21, it will pick up in FY2022 to around 11%. The increase will come due to higher international energy prices, significant currency depreciation, and elevated global food prices from supply disruptions. Throughout the year, Pakistan will continue to face inflationary pressures.

FY23: Better times ahead?

On the other hand, growth is expected to accelerate to 4. 5% in FY2023 due to stronger private consumption and investment.

“Pakistan’s economy is recovering steadily thanks to well-coordinated fiscal and monetary responses to the pandemic,” said ADB Country Director for Pakistan Yong Ye. It is indeed true that Pakistan fared remarkably well during the pandemic. It even gained international recognition.

Read more: Economic Survey out: Pakistan shows strong growth among world economies despite pandemic

“These led to a remarkable expansion in the industry and services sectors. It is key to continue structural reforms along with appropriate fiscal and monetary policies to contain rising inflation and external imbalances,” Yong Ye said.

“Comprehensive reforms in tax policy and administration are also critical to boosting revenues in order to fund essential public services. ADB is fully committed to supporting Pakistan’s sustainable development,” he added.