ISLAMABAD: The government has taken various steps and administrative measures to counter the downside risks for the economy.
Although the economic recovery is underway, still, the domestic and international scenario is changing over the course of time, said in Monthly Economic Update and Outlook, March 2022 issued by the Ministry of Finance here on Monday.
Thus, inflationary and external sector risks are building macroeconomic imbalances.
International commodity prices are expected to rise further because of rising geopolitical tensions.
Although their pass-through into domestic consumer prices will be contained by current and newly designed government measures and relief packages.
Still, YoY inflation is expected to remain temporarily within the double-digit territory.
The MEI remains strong, although some slowdown in growth in Feb 2022 is observed.
According to reports , the global economy is presently facing three challenges (financial sanctions, commodity prices and supply-chain disruptions) due to the ongoing war between Russia and Ukraine.
These challenges have fuelled global inflation and downgraded the growth outlook in most countries.
Both energy and non-energy prices increased in February 2022 by 7.7 percent
and 4.2 percent respectively.
Among key subgroups, only fertilizers witnessed a decline of 1.9 percent, agriculture commodities rose 4.5 percent, metals and minerals 4.7 percent and precious metals 2.2 percent.
In real sector, Wheat crop has been sown on an estimated area of 8.995 million hectares.
The harvest of wheat has started in lower Sindh, however Production of wheat is expected to be around 28.9 million tonnes.
During Jul-Jan FY2022, LSM posted a growth of 7.6 percent as compared to 1.8 percent same period last year.
In Fiscal, Monetary and External, the fiscal deficit in Jul-JanFY2022 was recorded at 2.9 percent of GDP (Rs 1862 billion).
The primary balance posted a deficit of Rs 174 billion.
During 1st July – 25th February, FY2022 money supply (M2) shows a growth of 0.5 percent (Rs 123.7 billion) compared to growth of 4.59 percent (Rs 960.1 billion) in last year.
During Jul-Feb FY2022, the current account deficit was recorded at $ 12.1 billion.
In addition, economic growth in Pakistan’s main trading partners continues to remain above trend, although some slowdown may be in the cards due to the uncertainties surrounding the recent geopolitical tensions and the continued increase in international commodity prices.
In March, exports are expected to continue their upward trend, backed by the export-friendly policies that have been implemented. Exports also benefit from the Real Effective Exchange rate. Imports will probably return to a level that is more in line with domestic economic activity and the levels of international commodity prices.
As a result, the trade balance may less deteriorate in March 2022 as well. However, geopolitical risks still persist. In March workers’ remittances are expected to revert to normal levels.
Taking these factors into account, as well as its other components, the current account deficit in March is expected to stay well below the unsustainable levels observed during the period from Aug 2021 up to Jan 2022.
The first seven months of the current fiscal year have witnessed significant pressure on fiscal accounts due to rising expenditures under grants and subsidies. On the revenue side, FBR tax collection has been able to achieve more than 65.2 percent of its annual target during the first eight months of the ongoing fiscal year.
However, the government has announced a relief package for the masses to offset the increasing oil prices by reducing the sales tax rate and petroleum development levy.
Pakistan’s economic performance continues a trajectory compatible with an economic growth target of around 5 percent in the current fiscal year.