The central bank, in its flagship economic health report released on Wednesday, decreased its predicted GDP growth from the previously disclosed range of 3–4% for the current fiscal year, citing flood-induced destruction and the stabilization policy as important factors.
However, the State Bank of Pakistan (SBP) stated that economic growth was stronger than anticipated in the 2021–22 fiscal year as real GDP increased by 6 percent compared to 5.7 percent a year earlier in its Annual Report on the State of Pakistan’s Economy, which mainly covered the previous fiscal year that ended on June 30.
The primary drivers of this growth were a broad-based expansion in large-scale manufacturing (LSM) and improved agricultural output, the report said.
“A combination of adverse global and domestic developments led to the re-emergence of macroeconomic imbalances during FY22,” it said.
The SBP said that the economy was already in a stabilization 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 impinge on the country’s real 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 large-scale destruction of infrastructure in the affected provinces might also undermine the country’s growth prospects during the year, the bank said.
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.
One major reason is the cork put by the SBP on the opening of letters of credit (LCs) for imports in an attempt to save dollars.
