KARACHI: The State Bank of Pakistan (SBP) has projected the real GDP growth in the range of 1.5-2.5 percent for fiscal year (2020-21) but said risks attached with the COVID-19 could hurt it.
According to SBP’s first quarterly (July-Sep) report, as the economy recovers from the COVID-19-induced contraction, it is now faced with uncertainty related to intensification of the second wave of the pandemic.
“However, downside risk to this projection includes the ongoing second wave of COVID-19, which has swept across many countries and, in Pakistan’s case, gained momentum in November 2020,” the report added.
SBP further said that the country’s economy started to regain its pre-COVID trajectory in the first quarter of this fiscal year (21) due to a notable pickup in economic activity supported by financial relief measures of the government.
“The overall recovery is attributed to two main factors including the national strategy that contained the pandemic and the timely and well-calibrated support measures of the government and the SBP that gave an extra impetus to the resumption of economic activity in Q1-FY21,” it added.
It also said, “The improvement in various economic indicators during 1QFY21 is encouraging. However, its continuation in the short term depends to a large extent on the trajectory of the pandemic, while sustainable growth over the medium term would require progress on the structural reforms front.”
The report noted that a timely and well-calibrated economic policy response to the COVID-19 crisis from the government and the SBP helped prevent deeper fallout from the crisis and lay the foundations for economic recovery.
“Specifically, in the external sector, the current account posted a surplus, primarily due to robust workers’ remittances, rebound in exports, and lower services imports. Continued policy measures under the Pakistan Remittance Initiative (PRI) and the promotion of formal and digital channels played a major role in driving remittances up,” it informed.
The SBP said as, for the fiscal deficit, the latest projections suggest that it remains on track to meet the annual target of 7pc of GDP, while the fiscal situation would continue to depend on the domestic evolution of COVID-19.
Commenting on inflation, the SBP projected average inflation in FY21 to remain in the 7–9pc range. “It is important to highlight that food inflation, triggered by supply-side factors, has been driving up headline inflation recently,” it said.
