Latest news with #StateofPakistan'sEconomy
Business Recorder
29-04-2025
- Business
- Business Recorder
Pakistan's real growth forecast stays unchanged: State Bank
KARACHI: The State Bank of Pakistan (SBP) on Monday said Pakistan's macroeconomic outlook for FY25 has brightened considerably, supported by improving economic indicators, easing financial conditions and stronger external balances. With these developments, the real GDP growth forecast for FY25 remains unchanged at 2.5 to 3.5 percent. According to the 'State of Pakistan's Economy', Half Year Report FY25, released by SBP on Monday, the macroeconomic outlook depends on the evolving global economic and political environment, with three key risks: rising protectionist trade policies affecting exports, remittances, and commodity prices; spillovers from geopolitical conflicts; and a resurgence of global inflation due to tariffs and supply-chain constraints, tightening financial conditions for emerging economies. However, the SBP said that, risks to the growth outlook remain skewed to the downside. While lower international oil prices can provide an upside, additional fiscal consolidation and less than expected wheat harvest may weigh down on growth. SBP likely to cut key policy rate by 50bps to 11.5%, brokerage house says 'The macroeconomic outcomes and developments have significantly improved the overall outlook for FY25 compared to the beginning of the year. While growth slowed in H1-FY25 compared to the same period last year, the latest data on high-frequency indicators suggest that momentum in economic activity is gaining traction', the report said. With stronger-than-expected growth in workers' remittances, declining commodity prices, and sustained export momentum, SBP projected the current account balance range between -0.5 to 0.5 percent of GDP for FY25 that. This is anticipated to provide a buffer against reduced financial inflows and bolster external reserves. Considering the improvement in fiscal accounts in H1-FY25 was majorly enabled by hefty SBP profit transfer and contained subsidy disbursements, the projection for fiscal deficit remains unchanged in the range of 5.5-6.5 percent for FY25. Moreover, any further shortfall in tax revenue remains a major upside risk. The fiscal consolidation, tight monetary policy stance, ample stock of key food staples, and benign trends in global commodity prices are expected to keep overall inflationary pressures subdued for the remainder of FY25, the report mentioned. According to SBP with steep disinflationary trend and recent movements in food and energy prices in domestic as well as in international markets, the projection of average inflation for FY25 has been considerably revised downward to 5.5-7.5 percent, from the earlier projection of 11.5-13.5 percent. These projections incorporate the expected increase in inflation in the last few months of FY25 due to fading high base effect, it added. Similarly, sales of automobiles, cement, and POL products have picked up in recent months, and exports of high value-added textiles is maintaining a rising trend. The ease in financial conditions and lower global energy prices are other favorable factors expected to gradually support industrial and services sectors. The agriculture sector, however, continues to show subdued growth with the latest estimates indicating lower wheat production. However, given that import volumes are rising in line with activity in some large industries, any shock to global commodity prices could pose an upside risk. While inflation is expected to stabilize around the lower bound of the revised projection range in FY25, the report highlighted several risks to medium-term outlook. These include global trade disruptions and related commodity price volatility in light of the reciprocal tariffs, the timing and magnitude of adjustments in administered energy prices, new revenue measures, and pressures on local currency due to movements in international currencies and weak financial inflows, the report said. The report said that the macroeconomic outlook is contingent on how the global economic and political environment shapes up. In this context, there are three prominent risks. First, the recent shift towards a more protectionist trade policies has already begun to take effect. These tariffs are impacting geopolitical contenders and key trading partners. Rising tariffs could disrupt trade and economic activity, having implications for EMDEs' exports and remittances, and international commodity prices. Second, the possible spillovers of ongoing geopolitical conflicts to global economy, in general and commodity prices, in particular. Third is concerning the resurgence of inflation globally due to tariffs and potential supply-chain constraints, and their implications for global financial conditions, which may adversely impact emerging economies. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
Real growth forecast stays unchanged: SBP
KARACHI: The State Bank of Pakistan (SBP) on Monday said Pakistan's macroeconomic outlook for FY25 has brightened considerably, supported by improving economic indicators, easing financial conditions and stronger external balances. With these developments, the real GDP growth forecast for FY25 remains unchanged at 2.5 to 3.5 percent. According to the 'State of Pakistan's Economy', Half Year Report FY25, released by SBP on Monday, the macroeconomic outlook depends on the evolving global economic and political environment, with three key risks: rising protectionist trade policies affecting exports, remittances, and commodity prices; spillovers from geopolitical conflicts; and a resurgence of global inflation due to tariffs and supply-chain constraints, tightening financial conditions for emerging economies. However, the SBP said that, risks to the growth outlook remain skewed to the downside. While lower international oil prices can provide an upside, additional fiscal consolidation and less than expected wheat harvest may weigh down on growth. SBP likely to cut key policy rate by 50bps to 11.5%, brokerage house says 'The macroeconomic outcomes and developments have significantly improved the overall outlook for FY25 compared to the beginning of the year. While growth slowed in H1-FY25 compared to the same period last year, the latest data on high-frequency indicators suggest that momentum in economic activity is gaining traction', the report said. With stronger-than-expected growth in workers' remittances, declining commodity prices, and sustained export momentum, SBP projected the current account balance range between -0.5 to 0.5 percent of GDP for FY25 that. This is anticipated to provide a buffer against reduced financial inflows and bolster external reserves. Considering the improvement in fiscal accounts in H1-FY25 was majorly enabled by hefty SBP profit transfer and contained subsidy disbursements, the projection for fiscal deficit remains unchanged in the range of 5.5-6.5 percent for FY25. Moreover, any further shortfall in tax revenue remains a major upside risk. The fiscal consolidation, tight monetary policy stance, ample stock of key food staples, and benign trends in global commodity prices are expected to keep overall inflationary pressures subdued for the remainder of FY25, the report mentioned. According to SBP with steep disinflationary trend and recent movements in food and energy prices in domestic as well as in international markets, the projection of average inflation for FY25 has been considerably revised downward to 5.5-7.5 percent, from the earlier projection of 11.5-13.5 percent. These projections incorporate the expected increase in inflation in the last few months of FY25 due to fading high base effect, it added. Similarly, sales of automobiles, cement, and POL products have picked up in recent months, and exports of high value-added textiles is maintaining a rising trend. The ease in financial conditions and lower global energy prices are other favorable factors expected to gradually support industrial and services sectors. The agriculture sector, however, continues to show subdued growth with the latest estimates indicating lower wheat production. However, given that import volumes are rising in line with activity in some large industries, any shock to global commodity prices could pose an upside risk. While inflation is expected to stabilize around the lower bound of the revised projection range in FY25, the report highlighted several risks to medium-term outlook. These include global trade disruptions and related commodity price volatility in light of the reciprocal tariffs, the timing and magnitude of adjustments in administered energy prices, new revenue measures, and pressures on local currency due to movements in international currencies and weak financial inflows, the report said. The report said that the macroeconomic outlook is contingent on how the global economic and political environment shapes up. In this context, there are three prominent risks. First, the recent shift towards a more protectionist trade policies has already begun to take effect. These tariffs are impacting geopolitical contenders and key trading partners. Rising tariffs could disrupt trade and economic activity, having implications for EMDEs' exports and remittances, and international commodity prices. Second, the possible spillovers of ongoing geopolitical conflicts to global economy, in general and commodity prices, in particular. Third is concerning the resurgence of inflation globally due to tariffs and potential supply-chain constraints, and their implications for global financial conditions, which may adversely impact emerging economies. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
SBP sees FY25 inflation of 5.5–7.5pc, real GDP growth of 2.5-3.5pc
KARACHI: Pakistan's macroeconomic conditions strengthened further in the first half of this fiscal year (FY25), with key indicators showing marked improvement. Headline inflation fell to a multi-year low by March 2025, the current account recorded a surplus bolstering foreign exchange reserve, and the fiscal deficit was contained to its lowest level in two decades, supported by a record surplus in the primary balance. According to the 'State of Pakistan's Economy', Half Year Report FY25, released by State Bank of Pakistan on Monday the calibrated monetary policy stance, fiscal consolidation, benign global commodity prices together with approval of IMF's Extended Fund Facility (EFF) program mainly underpinned these favorable outcomes. In addition, the upgrade of the country's credit rating by international agencies was mentioned as recognition of the improving macroeconomic environment. The report highlighted that inflationary pressures have receded notably, as headline inflation reached a multi-decade low of 0.7 percent by March 2025. This steep disinflation was attributed to a confluence of factors, including tight monetary policy stance and fiscal consolidation that kept the domestic demand in check, improved supply conditions, respite in energy price adjustments, and subdued international commodity prices. SBP likely to cut key policy rate by 50bps to 11.5%, brokerage house says As a result of cooling inflationary pressures and improving inflation outlook, the SBP reduced the policy rate by 1000 basis points from June 2024 – February 2025. The report further noted that the consequent ease in financial conditions, coupled with a slight uptick in economic activity and ADR-related lending, contributed to a substantial growth in private sector credit during H1-FY25. The moderation in real GDP growth was attributed to lower production of important Kharif crops and contraction in industrial activity during H1-FY25. A broad-based decline in Kharif crops was seen to be caused by falling area under cultivation and lower yields. The report pointed to the key role of agriculture policy uncertainty, last year's low crop prices, unfavorable weather conditions, and lower use of certified seeds and other inputs for this lackluster performance. It also mentioned that lower contraction in industry during H1-FY25 compared to the previous year was supported by small scale manufacturing, utilities and slaughtering, whereas mining & quarrying, construction and large-scale manufacturing contributed negatively. Moreover, the report observed that the services sector performed relatively better in H1-FY25, compared to the same period last year. According to the report, a steady increase in exports and workers' remittances during H1-FY25 outweighed a notable increase in imports, leading to a surplus in the current account balance. These developments, together with the disbursement of the first tranche under the IMF's EFF and a slight pick-up in private inflows, were noted to have strengthened SBP's FX reserves. The report also includes a special chapter titled 'Pakistan's Low Competitiveness: A Case for Investing in Productivity'. The analysis underscores that weak growth in labor productivity and total factor productivity has adversely affected the country's economic competitiveness over time, which has contributed to the frequent boom-bust cycles. The chapter finds that Pakistan's performance over time across most drivers of productivity and underlying structural factors has been notably weak, when compared to peer economies. Therefore, emphasis is placed on addressing the macroeconomic and structural constraints to productivity growth. Different box items in various chapters of the report highlight the structural issues in the economy, with relevant recommendations in the light of cross-country experiences. Reuters adds: Pakistan's average inflation in the fiscal year ending June 2025 is expected to be in the range of 5.5-7.5%, while there is no change in the projection for real GDP growth of 2.5–3.5%, Pakistan's central bank said on Monday in its half-yearly economic report. Copyright Business Recorder, 2025
