Monthly ‘Economic Update and Outlook’: Economic recovery confronted with inflation, external pressure: MoF

ISLAMABAD: The Finance Ministry stated Monday that Pakistan’s economic recovery is confronted with inflation and external pressure due to depreciation of exchange rate, high path of growth as well as international commodity prices, seasonal and demands factors.

The ministry, in its monthly “Economic Update and Outlook” for November 2021 based on four months and first quarter economic data, noted that Pakistan is on a high growth path but at the same time, it is confronted with persistent inflationary pressure.

The level and degree of persistence of inflation is the consequence of depreciation that followed the previous balance of payments crises, reinforced by the acceleration of worldwide inflation and the exceptional surge in international commodity prices.

These events put a lot of stress on the external accounts, more specifically on the balance in trade of the goods and services and from there on the current account balance.

Pakistan’s inflation rate is driven by the demand factors, international commodity prices, exchange rate, seasonal factors, and economic agents’ expectations concerning the future developments of these indicators.

Acceleration of worldwide inflation, as well as a significant increase in freight charges making international trade more costly.

Update recorded that year-on-year inflation is marginally increased in the last two months, however, going forward, this increase in inflation may be tempered by the seasonal profile whose contribution was positive in October 2021 but is usually about neutral in the months of November.

In addition, the government’s policy, administrative and relief measures may support to ease out the inflationary pressures.

While on the other hand, new impulses in November may originate due to the rise in international commodity prices.

The ministry also highlighted that globally, the prices of crude oil along with all other energy inputs are on the rising trend due to increasing global demand post-Covid-19 scenarios.

Added with this, a rise in freight charges have made international trade costly and caused a hike in global inflation.

Copyright Business Recorder, 2021