ISLAMABAD: The government expects a slowdown in economic growth in the next fiscal year 2022-23 subsequent to the likely resumption of the International Monetary Fund (IMF) programme, fiscal adjustment efforts, addressing worsening trade balance, and mitigating political and economic uncertainty.
The Ministry of Planning, Development and Special Initiatives has stated that with the likely resumption of the IMF programme, the economic outlook for the next fiscal year 2022-23 is expected to result in an orderly rebalancing between imperatives of economic growth and addressing the external sector vulnerabilities, particularly, in the light of the extent of global slowdown and the expected abatement of global inflation in commodity prices and the stability of exchange rate movements.
According to the ministry’s document presented to the Annual Plan Coordination Committee (APCC) meeting held on Saturday, fiscal adjustment efforts, addressing worsening trade balance, and mitigating political and economic uncertainty will result in a slowdown in economic growth.
Keeping in view external and local uncertain economic environment, the GDP growth will slightly taper off and is envisaged at five percent for 2022-23 on the back of agriculture (3.9 per cent), manufacturing (7.1 per cent) and services sector (5.1 per cent).
Investment will also be moderated because of fiscal and current account compression. Inflation will stay in double-digit as global inflationary pressures will not taper off very quickly.
The projected agriculture growth performance at 3.9 percent is mainly contingent upon the revival of cotton and wheat production, consistent availability of water, certified seeds, fertilisers, pesticides and agriculture credit facilities.
Revival of these crops will not only support a growth momentum but will also ease out the BoP pressures through lesser import requirements. Elevated industrial performance over the past two years is expected to consolidate and augmented production capacity during these years will anchor the growth momentum; however, the growth momentum will be moderated owing to fiscal consolidation efforts. The broad-based revival of the LSM is projected to sustain growth at 7.4 percent during 2022-23.
There are downside risks of high cost and low supplies of energy inputs, exchange rate related uncertainties and Russia-Ukraine war related supply shocks, which have a potential to impact the manufacturing sector. The overall manufacturing sector is projected to post growth of 7.1 percent during 2022-23.
The services sector will also be subject to moderation in growth and is targeted to grow by 5.1 percent in 2022-23 which is still lower than its five-year pre-Covid-19 annual average growth of 5.3 percent. Expected performance in both agriculture and industrial sectors will complement the targeted growth in the services sector. Investment level for the year 2022-23 is expected to decrease slightly to 14.7 percent of the GDP due to stabilization and an uncertain economic environment.
Fixed investment is expected to grow by 13 percent on a nominal basis; however, as a percentage of the GDP it will decrease marginally as compared with last year and will remain around 13 percent of GDP in 2022-23. The National Savings rate is targeted at 12.5 per cent of the GDP.
Fiscal consolidation will be pursued and efforts will be made to bring down the fiscal deficit through a combination of revenue enhancement and expenditure management policies. The monetary policy stance will remain vigilant and supportive of demand management policies. The external sector will improve upon import compression measures. Export outlook will be impacted by global demand compression and increasing protectionism tendencies in the world.
Copyright Business Recorder, 2022