GDP boost to decade high of 5.3pc: SBP
Karachi: State Bank of Pakistan (SBP) reported third quarterly report on stated that economy has preserved its growth thrust. Real Gross Domestic Product (GDP) has increased to a decade high of 5.3 per cent.
The real GDP growth in fiscal year 2016 (FY16) was 4.5pc. The SBP report added that certain other macroeconomic indicators, such as subdued inflation, investment growth and rising private sector credit have also showed an encouraging picture.
The report also highlighted the revival in the agriculture sector during the fiscal year 2017 (FY17), which was supported by favorable policy measures, including subsidy on fertilizer, reduction in sales tax on tractors, and increased access to finance.
Better agriculture had, in turn, positive spillover for trade and manufacturing sectors, argued by the report. Further, Public Sector Development Programme (PSDP) and China-Pakistan Economic Corridor (CPEC)-related activities also continued to boost construction related industries.
The overall improvement in business sentiments along with supportive policies (historic low interest rate, high infrastructure spending and better law and order) has encouraged a number of firms to pursue expansion plans, as observed by the SBP report.
This was reflected in a significant surge in private sector credit off-take during FY17, with a sizable share of fixed investment loans. At the same time, an increase in machinery imports was also noted. The report also mentions the decline in exports and worker remittances, which along with the increase in imports led to a higher current account deficit as compared to the last year.
On the financing side, the official external inflows in Jul-Mar FY17 stood around the same level as last year, while both FDI and FPI inflows increased. Although SBP’s foreign exchange (FX) reserves declined during this period, these are sufficient to comfortably finance more than four months of imports.
Regarding fiscal situation, the Report observes an increase in the fiscal deficit to 3.9 percent of GDP during Jul-Mar FY17. The expenditureside of the fiscal operations remained well-managed with a contained growth in current expenditure and a robust growth of about 15 percent in the development expenditures. However, growth in tax revenues remained less than the target.
The report also underscores the importance of sustainable levels of current and fiscal accounts in order to maintain the prevailing growth momentum, and hard-earned economic stabilization.