Pakistan´s Economic Growth Continues To Disappoint

In the last few months Pakistan´s economic situation has been deteriorating due to unstable political situation, rise in insurgency and global slowdown.

Indeed, the fiscal year 2012-13 was the fifth consecutive year where GDP growth missed the official target of 4.3 percent. In fact, according to provisional figures, the GDP expanded only 3.6 percent, an insufficient rate to absorb the country´s rising population. Moreover, industrial production has been growing below potential due to constant shortages of energy. In addition, Pakistan has been registering huge trade deficits as imports continue to surge. In fact, in April, the country posted the biggest trade deficit since November of 2011. To make things even worse, the budget deficit has reached unsustainable levels causing the deterioration of currency reserves and bringing the value of currency to a record low. As a result, the country may need a new bailout from the IMF. Yet, as Pakistan failed to comply with the tax and structural reforms imposed by the 2008 bailout programme, the IMF may be reluctant to a new support package. Furthermore, given that it may take some time for the new elected government to be sworn in, the Fund will likely postpone any decision until the government is officially in power. On the positive side, inflation has been in a downward trend for almost a year and in April, it decreased to a nine-year low.

In April, exports increased 3.68 percent to 2.094 billion Rupees from the 2.020 billion Rupees registered in the same month of the previous year. Nevertheless, in the same period, the trade deficit widened 26.3 percent from a year earlier, driven by 12.9 percent rise in imports.
In the 12 months through April, the inflation rate rose to 5.8 percent, the lowest level since March 2004. The State Bank of Pakistan decided on April 12th, to keep borrowing costs unchanged at 9.5 percent, the lowest rate in five years.





Duarte Ricardo |
5/14/2013 11:11:33 AM