The central bank has lowered its projected GDP growth from the previously announced range of 3-4 per cent for the current fiscal year, citing flood-induced destruction and the stabilisation policy as significant factors in its flagship economic health report released on Wednesday.
However, in its Annual Report on the State of Pakistan’s Economy, which mainly discussed the previous financial year that ended on June 30, the State Bank of Pakistan (SBP) said economic growth was more substantial than expected in the 2021-22 fiscal year as real GDP increased by 6pc compared to 5.7pc a year ago.
The report said that the primary drivers of this growth were a broad-based expansion in large-scale manufacturing (LSM) and improved agricultural output.
“A combination of adverse global and domestic developments led to the re-emergence of macroeconomic imbalances during FY22,” it said.
Cuts FY23 outlook after considering flood-induced destruction, the policy focus on stabilisation
The SBP said that the economy was already in a stabilisation phase when widespread flooding hit a large part of the country at the start of the current fiscal year.
It said the flooding was likely to influence the country’s actual economic activity through various channels, fearing that losses in agriculture emerging from the damages to crops and livestock were likely to transmit to the rest of the economy through various backward and forward linkages.
The bank said that the large-scale destruction of infrastructure in the affected provinces might also undermine the country’s growth prospects during the year.
The SBP avoided providing any range for the growth rate of the current financial year, apparently due to the worsening economic situation. Industries have either shut down or drastically cut their production due to high inflation and the unavailability of gas and electricity.