In Pakistan, Year-on-year CPI inflation is witnessed at 36.4 percent in April which is marginally above 35.4 percent in March 2023.
However, the average inflation stands at 28.2 percent from July-April FY2023. It is expected to decline in the coming months. The total revenue of the Federal government has shown an increase of 18.1 percent during July-March FY2023 over the comparable period last year while the total expenditures grew (primarily due to debt servicing) by 18.7 percent. Fiscal deficit reduced to 3.6 percent of GDP in Jul-Mar FY2023 from 3.9 percent of GDP last year.
The Finance Division has mentioned these developments in its monthly report “Economic Update and Outlook” released on Tuesday.
Fiscal consolidation measures accompanied by realignment of the current account are enabling the economy to back on a sustainable path. The current account posted a surplus of USD 18 million in April 2023 against a deficit of USD 640 million during the same month last year. Overall, the current account posted a deficit of USD 3.2 billion from July-April FY2023 against a deficit of $ 13.6 billion during the same period last year.
The global economy has been experiencing a weak recovery and facing risks amid stubborn inflation, rising interest rates, and heightened uncertainties. IMF is expected the global economy to grow at 2.8 percent in 2023 followed by 3.0 percent in 2024. However, World Economic Situation and Prospects report by the UN has marginally revised the global growth projections upward by 0.4 percent in May 2023 compared to its projections in January 2023, which is now expected to grow by 2.3 percent in 2023, on account of better prospects for the US, EU, and China.
Despite this uptick, the growth rate is still well below the average growth rate in the two decades before the pandemic of 3.1 percent. For many developing countries, growth prospects have deteriorated amid tightening credit conditions and rising costs of external financing. Global trade remains under pressure due to geopolitical tensions, weakening global demand, and tighter monetary and fiscal policies. The volume of global trade in goods and services is forecasted to grow by 2.3 percent in 2023, well below the pre-pandemic trend.
However, the economic situation of European countries and the USA would be critical for those whose exports are mainly destined there. In the first quarter of 2023, real GDP grew 1.1 percent annually, compared to 2.6 percent in the fourth quarter of 2022, according to the US Bureau of Economic Analysis. Consumer spending, exports, federal, state, and local government expenditure, and nonresidential fixed investment increased real GDP, but private inventory investment and residential fixed investment decreased. After 3.6 percent in 2022, U.S. inflation rose to 3.8 percent in the first quarter.
