Govt taking measures to keep growth momentum intact: Outlook

ISLAMABAD, AUG 25 (APP): The government is taking all possible measures to counter high inflationary and external sector pressures so that the growth momentum may remain intact, says Monthly Economic Update and Outlook for August 2022.
“The economy of Pakistan is going through high inflationary and external sector pressures due to higher commodity prices both in the international and domestic market and exchange rate depreciation (YoY),” the report launched here on Thursday said.
Inflation has continued to accelerate in recent months, mainly due to supply shocks that have created very significant monthly impulses on the Consumer Price Index (CPI) level.
If these monthly impulses can be contained to more normal levels in future months, inflation may start to decelerate, the report says adding but even then, Year-on-Year (YoY) inflation may stay in double digit for rest of the current fiscal year.
According to the report, economic growth remained positive, but restrictive demand management and high inflation may cause Pakistan’s cyclical position to deteriorate in the coming months.
This cooling off may bode well for the trade balance and by extension for the current account balance, official reserves, and the exchange rate.
On the other hand, recessionist tendencies in Pakistan’s main export markets may contain exports. Furthermore, Pakistan’s NEER (nominal effective exchange rate ) has significantly depreciated in recent months, and its REER (real effective exchange rate) appreciated again in June.
The current account balance is expected to improve considerably in the coming months while the new agreement with the International Monetary Fund (IMF) ensures that Pakistan’s external financing needs will be met.
This opens room for further implementation of supply-side policies that should elevate Pakistan’s potential growth rate to a higher sustainable level.