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KARACHI, Dec 30: The State Bank says that Pakistan’s GDP may grow 5.4 per cent in the current fiscal year ending in June 2004 against 5.1 per cent in 2003 and against the original target of 5.3 per cent. It also says that consumer inflation may reach 3.6- 4.2 per cent at the end of FY04 against 3.1 per cent in FY03 and against the original target of 3.9 per cent.
In its first quarterly report for 2004 released on Tuesday, the SBP has projected total exports at $12.2 billion for the current fiscal year against the original target of $12.1 billion. But it has also projected total imports at $13.3 billion — $500 million above the original target of $12.8 billion. In the last fiscal year, exports stood at $11.2 billion and imports at $12.2 billion.
The SBP has projected a higher-than targeted growth in economy as it believes that the large-scale manufacturing sector and the services sector may grow beyond original targets.
The central bank believes that workers’ remittances or money sent back home by overseas Pakistanis may reach the target of $3.6 billion in FY04.
The report, which covers the period July-September 2003, says that economic developments have produced two themes:
(i) Macroeconomic stability and financial sector reforms can have very real and substantial impact on the real economy; and (ii) this can be helped by a balanced partnership between the public and private sector.
The report laments low level government spending on public goods like education and health. “The government’s contribution to setting the direction of the economy and creating enabling environment is not merely confined to the provision of policy and regulation...but also to the provision of public goods particularly health and education.”
AGRICULTURE: The SBP has projected that agriculture sector may achieve the targeted growth of 4.2 per cent in FY04. But it says that “if the actual cotton output falls below 10 million bales the achievement of the crop sub-sector growth target will become heavily dependent on an exceptional wheat harvest.” The target for wheat production is 20.5 million tons for FY04. The SBP report says that the recent increase in wheat support price “has rekindled the prospects for higher than expected production.”
But independent market reports suggest that both cotton and wheat outputs may fall below targets — the former because of a pest attack and the later because of late sugarcane crushing.
INDUSTRY: The report says that industrial activities went up in first quarter of FY04 with the index of industrial production rising by 10.1 per cent. Given this strong performance “it is probable that the FY04 annual industrial growth target will be met unless the aggregate LSM growth is substantially undermined by a poor sugar output.” The report says that LSM grew 11.7 per cent in Q1- FY04 adding that the growth was broad-based.
INFLATION: The SBP says that inflationary pressures on the economy which were still weak till Q1-FY04 seem to be strengthening. Its assessment is based on “the steep rising trend in marginal CPI inflation during Q1-FY04, a spike in the October 2003 CPI, as well as the relative strength of non-food prices.”
The latest data shows that CPI inflation rose 2.62 per cent year-on-year in July-November 2003. Independent economists have been saying that this — coupled with an unusual growth in private sector credit disbursement — does indicate that inflation may surpass the target of 3.9 per cent by a very wide margin.
