Pakistan’s GDP growth expected to remain below 3–4% in FY23: SBP

In its annual economic health report released on Wednesday, the State Bank of Pakistan (SBP) slashed its predicted GDP growth from the previously disclosed range of 3–4 per cent for the current fiscal year, citing flood-induced destruction and the stabilisation policy as important contributors.

However, the central bank stated that economic growth was stronger than anticipated in the 2021–22 fiscal year as real GDP increased by 6 per cent compared to 5.7 per cent 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.

According to Geo, the GDP grew by 6 per cent in the previous fiscal year. In its monetary policy announcement from October, the SBP already reduced the economic growth to around 2 per cent.

According to the research, increased agricultural output and a broad-based expansion of large-scale manufacturing (LSM) were the main forces behind this gain.

Macroeconomic imbalances returned during FY22 as a result of a combination of unfavourable global and domestic circumstances.

When widespread flooding struck a significant portion of the nation at the beginning of the current fiscal year, the SBP claimed that the economy was in the middle of a stabilisation phase.

According to the report, the flooding was predicted to have an impact on the nation’s real economic activity through a number of channels. It was feared that losses in agriculture resulting from the destruction of crops and livestock would spread to the rest of the economy through a number of backward and forward links.

According to the bank, the extensive devastation of infrastructure in the afflicted provinces might also harm the nation’s chances for growth this year.

Due to the deteriorating economic climate, the SBP avoided stating a range for the growth rate of the current fiscal year. Due to the high rate of inflation and the scarcity of gas and electricity, industries have either stopped operating entirely or substantially reduced their production.

The SBP’s restriction on the opening of letters of credit (LCs) for imports in an effort to save money is a significant contributing factor.

In the event that the gas supply is not restored and no LCs are opened, the All-Pakistan Textile Mills Association has warned to declare layoffs within days.

According to the textile industry, up to 500,000 people who were either directly or indirectly employed by the business have lost their jobs. However, there are no official statistics in this regard.