ISLAMABAD: Although the economic recovery is still underway, the domestic and international scenario are changing over the course of time. Thus, inflationary, and external sectors risks are building macroeconomic imbalances. International commodity prices are expected to rise further. The pass-through of the increase in global commodity prices is somewhat contained due to government measures. Still it is expected that CPI inflation will increase and remain in double digit in April 2022.
Ministry of Finance has reported these developments in its Monthly Economic Updates & Outlook in April-2022, issued on Friday (April 29). For the last 2 months, growth in economic activity is fluctuating around 4%. Moreover, economic activities in Pakistan’s main trading partners continues to remain slightly above trend, some slowdown has been observed due to geo-political uncertainty and surge in commodity prices. If these tensions continue, Pakistan’s growth may be affected as well.
For April 2022, exports of goods and services are expected to continue their upward trend due to the exports-oriented policies. Imports are expected to remain at the level in line with domestic economic activity and international commodity prices. Resultantly, trade deficit is expected to remain around $3 billion in April. Remittances are expected to remain high as compared to previous months due to the Eid factor. Taking these factors into account, the current account will stay around $ 1.0 billion in April. During the first nine months of the current fiscal year, FBR exceeded its revenue target by 5.8 percent.
Despite massive tax relief on various essential items to the common man, FBR has been able to achieve a sizeable portion of its annual target. Similarly, various policy and operational measures have been initiated to maximize revenue potential through digitization, transparency and taxpayer facilitation. All these efforts have not only ensured the ease of doing business but also translated into healthy and steady revenue growth. Geo-political tensions and persistent high domestic inflation may impact domestic economic activities. The high inflation accompanying with monetary policy reaction may temporarily reduce growth prospects in the short run. But in the long-run, economic growth and employment are determined by the path of Pakistan’s productive capacity. This requires more productive investments from both foreign and domestic sources.
The war between Russia and Ukraine affecting the global economy through three channels. First, higher commodity prices are deteriorating the real income. Second, neighboring countries grappling with disrupted trade along with refugees’ influx. Third, higher investors’ uncertainty is reducing business confidence. Consequently, these channels are soaring international commodity prices and downgrading the global output growth by 0.8 percentage points in 2022. Both energy and non-energy prices surged in March 2022 by 24.1 and 8.1 percent respectively. Among key sub-groups, agriculture commodities jumped 7.2 percent, fertilizers 20.7 percent, metals and minerals 7.7 percent and precious metals 5.3 percent.
The production of all important Kharif crops in Pakistan is encouraging. Cotton production increased 17.7 percent to 8.3 million bales, Rice up by 10.7 percent to 9.3 million tonnes, Sugarcane increased by 9.6 percent to 88.8 million tonnes and Maize increased by 8.6 percent to 9.7 million tonnes. During Jul-Feb FY2022, LSM posted a growth of 7.8 percent as compared to 2.2 percent during the same period last year.
The fiscal deficit in Jul-Mar FY2022 was recorded at 4.0 percent of GDP. The primary balance posted a deficit of Rs 447.2 billion. During 1stJuly1stApril, FY2022 money supply (M2) observed growth of 2.7 percent (Rs 665.5 billion) as compared to growth of 6.7 percent (Rs 1,439.5 billion) last year. During Jul-Mar FY2022, the current account deficit is recorded at $ 13.2 billion.
