ISLAMABAD: There is a need to ensure that the new growth strategy is sustainable without any macroeconomic imbalances, according to monthly ''Economic Update and Outlook" for July 2021.
The economic update and outlook uploaded by the Ministry of Finance on its website also noted that the transition towards a higher potential growth level, pressure can be built on external accounts.
The objective of recent accommodative monetary and fiscal policies is to put Pakistan's economy on a higher growth trajectory.
The economic recovery in Pakistan's main exporting partners is making the external environment favourable.
However, recent deadly floods in Germany, China, India, and North America may raise direct and indirect economic losses along the global supply and trade chains.
In addition, in the transition towards a higher potential growth level, pressure can be built on external accounts.
Thus, it is important to closely monitor it in order to ensure that the new growth strategy is sustainable without any macroeconomic imbalances as observed in the past.
The economic update noted that the surge in economic growth is expected to continue in the fiscal year 2022 on account of reopening of economic activities and acceleration in vaccination process.
The risk of pandemic still exists; however, the government may not follow complete lockdown given the public behaves responsibly by following the COVID-related SOPs.
In recent months, the year-on-year inflation rate is on a declining trend and it is expected that this declining trend will continue in the absence of any major shock. Month-on-month inflationary impulses in July can be considered as 2nd round effect of previous increase in international commodity prices, from recent increase in gasoline prices, currency depreciation and monetary expansion.
Additionally, the month of July tends to show a positive seasonal inflation effect.
On the other hand, international food prices declined in June and government efforts to increase the efficiency of domestic food markets are still in place and are continuously being monitored and strengthened. The outlook said that the fiscal deficit reduced to 4.6 percent of GDP (Rs2,197 billion) during July-May, fiscal year 2021, down from 5.8 percent of GDP (Rs2,418 billion) last year.
The primary balance, on the other hand, recorded a surplus of Rs139 billion (0.3 percent of GDP) against the deficit of Rs339 billion (-0.8 percent of GDP) last year.
Copyright Business Recorder, 2021