ISLAMABAD: The economy of Pakistan needs to further lift its potential growth, and lay the foundation for more sustained and inclusive growth in the medium-term, a new report of the United Nations on the world economic situation and prospects says.

A briefing paper issued by the UN Department of Economic and Social Affairs (DESA) says the investment demand in Pakistan has gained further momentum recently, supported by healthy economic activity, improvements in the energy system, and large infrastructure projects under the China-Pakistan Economic Corridor (CPEC) and other public initiatives.

Official data also points towards a visible rise in loan demand during the first two quarters of the fiscal year 2017-18, especially in the corporate sector, report says.

While commending Pakistan’s economic performance, the report says that financial and investment conditions continue to be broadly favourable in most South Asian economies, amid accommodative monetary policies, low and relative stable inflation and robust business confidence.

The positive growth picture, together with policy reforms in some areas, is under-pinning private investments in several economies, the DESA report says.

The March 2018 issue of the briefing paper says that after a long period of subdued growth, the world economy has strengthened, supported by the revival of investment and trade, robust business and consumer sentiment and improving labour market indicators.

After a long period of subdued growth, the global economy has strengthened, supported by the revival of investment and trade, robust business and consumer sentiment and improving labour market indicators.

Since early 2017 global investment conditions have improved, underpinned by reduced banking sector fragilities in developed countries.

Financing costs and spread in emerging economies remain relatively low, supported by the recovery of capital flows and cross-border lending and higher commodity prices.

However, the prolonged period of abundant global liquidity and low borrowing costs has also allowed financial vulnerabilities to build, fueling investors’ search for yield and encouraging an under-pricing of risk, report says.

As the normalisation of monetary policy in the United States and other developed economies gains momentum, financial markets may be subject to large corrections and sudden spikes in volatility.

This has been illustrated by the widespread equity market sell-off in early February.

This period of extremely loose global financial conditions has pushed up asset prices and spurred rapid credit growth in many emerging economies.

On average, debt levels of non-financial emerging market corporates exceeded 100 per cent of gross domestic product (GDP) in 2017, up from 60pc in 2007.

Household debt levels and residential property prices have also escalated, most notably in parts of Asia.

As the pace of monetary policy normalisation in developed economies accelerates, emerging economies should prepare for a period of potentially lower and more volatile capital flows and tighter global liquidity conditions.

Published in Dawn, March 11th, 2018

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