Macroeconomic imbalances likely to affect Pakistan's growth prospects

"Despite achieving the growth of 5.97pc in FY2022, the underlying macroeconomic imbalances associated with domestic and international risks are making growth outlook indistinct," the Dawn newspaper reported quoting the ministry's Economic Adviser's Wing (EAW) Monthly Economic Update for June & Outlook.

The EAW also said that the demand management policy of State Bank of Pakistan (SBP) might be unsuccessful because of the constraints in supply and higher international commodity prices, adding that the policy might further reduce income levels, it added.

"Economic growth in Pakistan is facing challenging situation due to wider macroeconomic imbalances," the report stated while adding that current account deficit of the country might decrease towards the end of this fiscal year and onwards.

The report further mentioned that several potential risks might affect the growth aspects of the country even if they are expected to remain satisfactory.

One of the potential risks involve the trading partners of the country. In an attempt to counter inflation, the central banks of the country's trading partners are increasing their interest rates which might cause recession with these countries.

Another potential risk can be caused by an increase in the domestic interest rates of the SBP. "Exchange rate depreciation is also a source of concern as it makes the imported raw material more expensive," the report added.

The increase in domestic consumer prices is affecting the income of the people by limiting the spending power of consumers and investors, local media reported.

"These risk factors may challenge the macroeconomic environment and growth prospects", it added.

The report mentioned that the recent rise in international commodity prices, especially energy and food, will also be reflected in the domestic prices.

The year-on-year inflation is expected to accelerate in June and may remain within the range of 14.5-15.5pc, the Dawn reported.

Meanwhile, in its recent 'Pakistan Development Update', the World Bank has highlighted the structural weaknesses of Pakistan's economy which include low investment, low exports, and a low productivity growth cycle.

Moreover, the growth momentum is not expected to pick up in Pakistan in the near future as a sharp spike in the import bill would also impact the Pakistani Rupee adversely, as per local media.(ANI)