SBP cuts economic growth forecast to 3.5-4%

mhafeez

Chief Minister (5k+ posts)
SBP cuts economic growth forecast to 3.5-4%



The State Bank of Pakistan (SBP) has revised down its projection for real economic growth by half a percentage point, putting it in a range of 3.5-4% in the current fiscal year “mainly due to slowdown in growth of the agriculture sector and stabilisation measures taken to preserve macroeconomic stability.”

“SBP has revised down its projection for real GDP (gross domestic product) growth during FY19 by 0.5 percentage point to 3.5-4.0%,” the central bank said in its second-quarter (Oct-Dec 2018) report on the state of economy on Monday.

The economy was set to slow down in the second half (January-June) as inflation was likely to rise further, revenue collection would drop and fiscal deficit would widen further, the central bank said.

“Regarding price pressures, inflation is expected to remain high in the second half of FY19,” it said. “CPI inflation (is projected) at 6.5-7.5% for the full year,” it added.

The SBP projected that the fiscal deficit would further deteriorate by 0.5% of GDP, which brought it close to the level hit in FY18.

Large-scale manufacturing (LSM) contracted further in the second quarter. Moreover, “given that public development spending, a key driver for private sector industrial activities, is unlikely to pick up anytime soon, the full-year outlook for manufacturing activities remains subdued,” the SBP said.

Furthermore, private consumption is going to remain lower due to a tighter monetary policy and pass through of exchange rate depreciation, which has resulted in both higher energy prices and core inflation. In addition, according to the SBP, the prospects for the upcoming wheat crop remain subdued in terms of growth.

“All these aspects are going to constrain the services sector in the coming months as well,” it said.

Inflation is expected to remain high “due to the second round impact of recent exchange rate depreciations, upward adjustment in gas and electricity prices and higher budgetary borrowing from the SBP.”

However, the lagged impact of policy rate increases would be instrumental in keeping demand pressures under check. Acknowledging these risks, the SBP continues to project average CPI inflation at 6.5-7.5% for the full year.

As noted earlier, the primary deficit has increased further while there has been a sharp reduction in development expenditure in order to improve the fiscal position. This situation has become more challenging as the growth in current expenditure inched up to 17.3% in the first half as compared to 13.5% last year.

On the contrary, revenue collection contracted 2.4% in the same period as compared to the growth of 19.8% last year.

Since there is limited room to curtail government expenditure in coming months, it is the growth in revenue that will be instrumental in determining the overall fiscal position for FY19.

Incorporating the performance of revenue collection in the second half in the last four years, the SBP projected that the fiscal deficit would further deteriorate by 0.5% of GDP, which brought it close to the same level as in FY18.

Current account deficit

As for the external sector, while the current account deficit (CAD) improved $1.7 billion in first seven months of FY19, it was still high at $8.4 billion. “Some improvement is expected to continue in the remaining months as imports are likely to contract further on account of moderating domestic demand and relatively low international oil prices as compared to the beginning of FY19.”

However, merchandise exports are expected to miss the target due to waning demand in certain export destinations. Additionally, this is compounded by competitive pressures in the international arena and the lack of diversified and higher value added products that can effectively utilise the export quotas allowed under specific trade agreements.

“Meanwhile on the external financing front, the efforts of the government have started to materialise in the shape of bilateral inflows from Saudi Arabia, the UAE and China. Some of these inflows have already been realised while the rest are due in 2HFY19.”

Along with the Saudi deferred oil payment facility, these inflows have an important role in meeting the external financing gap for FY19, thereby, easing pressure on foreign exchange reserves and mitigating volatility in the foreign exchange market, it said.


Published in The Express Tribune, March 26th, 2019.
 
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Muhammad Jibran

Minister (2k+ posts)
Ab PTI k patwari kahaingay k hamari growth PMLN k first 8 months say zeyada hai :D ....
In bewaqofoun ko compare karna bhe nahe ata.....
Maeeshat ka beragharak kardiya hai PTI k arastoo nay
 

Okara

Chief Minister (5k+ posts)
mhafeez
Please requeat Ishaq Dar to come back to Pakistan to put Pakistani economy on right track. It's really sad Pakistan is unable to utilize expertise of a greatest economist of the century.
 

Okara

Chief Minister (5k+ posts)
Ab PTI k patwari kahaingay k hamari growth PMLN k first 8 months say zeyada hai :D ....
In bewaqofoun ko compare karna bhe nahe ata.....
Maeeshat ka beragharak kardiya hai PTI k arastoo nay
When Khadim Hussain Rizvi is going to release the GIN who is going to solve all issues of Pakistan especially in economy?
 

mhafeez

Chief Minister (5k+ posts)
mhafeez
Please requeat Ishaq Dar to come back to Pakistan to put Pakistani economy on right track. It's really sad Pakistan is unable to utilize expertise of a greatest economist of the century.
نہیں پہلے پی ٹی آئ کے ارسطو کو کوشش کرلینے دیں
 

Will_Bite

Chief Minister (5k+ posts)
“mainly due to slowdown in growth of the agriculture sector and stabilisation measures taken to preserve macroeconomic stability.”
Not sure whats so wrong about stability? Perhaps PMLN is looking for blind spending on infrastructure projects.
Just the other day, in a discussion with a PMLN supporter, his taunt to PTI was that the govt has taken billions from Saudi, UAE, China etc, but havent launched any mega project to show for it. And I was like WTF.
 

Eyeaan

Minister (2k+ posts)
نہیں پہلے پی ٹی آئ کے ارسطو کو کوشش کرلینے دیں
اتنا ظلم تو نہ کریں، ـــ ارسطو کا عہدہ احسن اقبال صاحب کا ٹریڈ مارک ہے -- وہ جوانی مین قتل و غارت مار دھاڑ کے عادی رہے ، انکی ناراضگی مول نہ لیں ـــ
 

mhafeez

Chief Minister (5k+ posts)
اتنا ظلم تو نہ کریں، ـــ ارسطو کا عہدہ احسن اقبال صاحب کا ٹریڈ مارک ہے -- وہ جوانی مین قتل و غارت مار دھاڑ کے عادی رہے ، انکی ناراضگی مول نہ لیں ـــ
ہر پارٹی کا اپنا ارسطو ہے
 

mhafeez

Chief Minister (5k+ posts)
Not sure whats so wrong about stability? Perhaps PMLN is looking for blind spending on infrastructure projects.
Just the other day, in a discussion with a PMLN supporter, his taunt to PTI was that the govt has taken billions from Saudi, UAE, China etc, but havent launched any mega project to show for it. And I was like WTF.
ہم صرف یہ پوچھ رہے ہیں کہ اتنے قرضے کدھر جا رہے ہیں ، ڈویلپمنٹ سب بند کردی ، سبسڈی سب بند کردی ، کچھ نیا نہیں بنارہے تو پیسے کدھر جارہے ، قرض ادا کرنے میں اب تک صرف سات سو ملین خرچ ہوۓ
 

Educationist

Chief Minister (5k+ posts)
SBP cuts economic growth forecast to 3.5-4%



The State Bank of Pakistan (SBP) has revised down its projection for real economic growth by half a percentage point, putting it in a range of 3.5-4% in the current fiscal year “mainly due to slowdown in growth of the agriculture sector and stabilisation measures taken to preserve macroeconomic stability.”

“SBP has revised down its projection for real GDP (gross domestic product) growth during FY19 by 0.5 percentage point to 3.5-4.0%,” the central bank said in its second-quarter (Oct-Dec 2018) report on the state of economy on Monday.

The economy was set to slow down in the second half (January-June) as inflation was likely to rise further, revenue collection would drop and fiscal deficit would widen further, the central bank said.

“Regarding price pressures, inflation is expected to remain high in the second half of FY19,” it said. “CPI inflation (is projected) at 6.5-7.5% for the full year,” it added.

The SBP projected that the fiscal deficit would further deteriorate by 0.5% of GDP, which brought it close to the level hit in FY18.

Large-scale manufacturing (LSM) contracted further in the second quarter. Moreover, “given that public development spending, a key driver for private sector industrial activities, is unlikely to pick up anytime soon, the full-year outlook for manufacturing activities remains subdued,” the SBP said.

Furthermore, private consumption is going to remain lower due to a tighter monetary policy and pass through of exchange rate depreciation, which has resulted in both higher energy prices and core inflation. In addition, according to the SBP, the prospects for the upcoming wheat crop remain subdued in terms of growth.

“All these aspects are going to constrain the services sector in the coming months as well,” it said.

Inflation is expected to remain high “due to the second round impact of recent exchange rate depreciations, upward adjustment in gas and electricity prices and higher budgetary borrowing from the SBP.”

However, the lagged impact of policy rate increases would be instrumental in keeping demand pressures under check. Acknowledging these risks, the SBP continues to project average CPI inflation at 6.5-7.5% for the full year.

As noted earlier, the primary deficit has increased further while there has been a sharp reduction in development expenditure in order to improve the fiscal position. This situation has become more challenging as the growth in current expenditure inched up to 17.3% in the first half as compared to 13.5% last year.

On the contrary, revenue collection contracted 2.4% in the same period as compared to the growth of 19.8% last year.

Since there is limited room to curtail government expenditure in coming months, it is the growth in revenue that will be instrumental in determining the overall fiscal position for FY19.

Incorporating the performance of revenue collection in the second half in the last four years, the SBP projected that the fiscal deficit would further deteriorate by 0.5% of GDP, which brought it close to the same level as in FY18.

Current account deficit

As for the external sector, while the current account deficit (CAD) improved $1.7 billion in first seven months of FY19, it was still high at $8.4 billion. “Some improvement is expected to continue in the remaining months as imports are likely to contract further on account of moderating domestic demand and relatively low international oil prices as compared to the beginning of FY19.”

However, merchandise exports are expected to miss the target due to waning demand in certain export destinations. Additionally, this is compounded by competitive pressures in the international arena and the lack of diversified and higher value added products that can effectively utilise the export quotas allowed under specific trade agreements.

“Meanwhile on the external financing front, the efforts of the government have started to materialise in the shape of bilateral inflows from Saudi Arabia, the UAE and China. Some of these inflows have already been realised while the rest are due in 2HFY19.”

Along with the Saudi deferred oil payment facility, these inflows have an important role in meeting the external financing gap for FY19, thereby, easing pressure on foreign exchange reserves and mitigating volatility in the foreign exchange market, it said.


Published in The Express Tribune, March 26th, 2019.
Bhervy
ye paisa kha hy
👇👇👇👇👇
 

Will_Bite

Chief Minister (5k+ posts)
ہم صرف یہ پوچھ رہے ہیں کہ اتنے قرضے کدھر جا رہے ہیں ، ڈویلپمنٹ سب بند کردی ، سبسڈی سب بند کردی ، کچھ نیا نہیں بنارہے تو پیسے کدھر جارہے ، قرض ادا کرنے میں اب تک صرف سات سو ملین خرچ ہوۓ
There is a little thing called 'current account', which is used to fund our imports. The difference between imports and exports for this year was almost $18 billion. The loans are going towards covering that $18 billion. I thought you had more common sense than a few other 'arastoos'
 

mhafeez

Chief Minister (5k+ posts)
There is a little thing called 'current account', which is used to fund our imports. The difference between imports and exports for this year was almost $18 billion. The loans are going towards covering that $18 billion. I thought you had more common sense than a few other 'arastoos'
Read the news again:
Current account deficit is not $18 billion.
 

mhafeez

Chief Minister (5k+ posts)
There is a little thing called 'current account', which is used to fund our imports. The difference between imports and exports for this year was almost $18 billion. The loans are going towards covering that $18 billion. I thought you had more common sense than a few other 'arastoos'
 
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