Despite considerable geopolitical downside risks and emerging commodities supercycle phenomena, Pakistan will achieve an economic growth target of 4.8 percent for the current fiscal year as the resumption of the International Monetary Fund programme is expected to bring improvements in a few indicators in the second half of the current fiscal year.

The Ministry of Planning in its Mid-Year Economic Review (July-December) 2021-22, issued on Friday, projected a slight let-up in the external sector vulnerabilities besides a reduction in commodity prices with exchange rate stability. “This rebalancing will help to achieve the original economic growth target of 4.8pc projected by the National Economic Council (NEC), a high-level body chaired by the prime minister, for FY22.

One of the positive factors, the mid-year review says is that the country’s half of the adult population is fully vaccinated, and this coverage provides a basis for wider immunity to the population. Moreover, recent fiscal adjustment efforts through supplementary money bills are likely to weigh on containing rising growth in aggregate demand.

According to the report, the industrial sector may witness slight slippage against the target, but the services sector is likely to surpass the target. The previous inflation projection will be surpassed by a fair margin.

However, the targets set for the external sector will be partially achieved, with the import target likely to be breached by a fair margin leading to higher than projected deficits in current and trade accounts.

Based upon developments in the 2HFY22, it is projected that the overall fiscal deficit will not be met owing to the additional cost of Covid-related vaccines and social protection. In the first half of FY22, Pakistan imported Rs186 billion worth of vaccines.

In the first half-year, inflation remained elevated due to a combination of factors related to sharply rising international energy and commodity prices and unfavourable exchange rate adjustments. The average inflation was recorded at 9.8pc during 1HFY22 as compared to 8.6pc in the comparable period of last year.

AGRICULTURE: The sector-wise projection shows that the agriculture sector is expected to achieve an envisaged full-year growth target of 3.5pc keeping in view the impressive performance of kharif crop and prospects of a good wheat crop. However, agriculture growth is mainly contingent upon the availability of certified seed and pesticides during the Rabi season.

Moreover, consistent availability of water and agriculture credit facilities will also help to support achieving the targeted growth.

Kharif crops are at the final stage of harvesting and early output estimates of all three major crops are higher than for the comparable period of last year.

Cotton arrivals till Jan 18 were 34.4pc higher than the comparable period of FY21. However, as the pace of recent arrivals has slowed down, the initial estimates of 8.4 million bales output are unlikely to be realised but final output will still exceed the last year’s cotton output of 7.1 million bales.

The sugarcane production is estimated at 87.7 million tonnes from an area of 1.3 million hectares, showing an increase of 8.7pc and 8.2pc in area and production, respectively, over the last year.

The rice production is estimated at 8.8m tonnes from an area of 3.5m hectares showing an increase of 5.8pc and 5pc in area and production, respectively, over the last year. The maize production for 2021-22 is estimated at 9m tonnes from an area of 1.4m hectares.

INDUSTRIAL SECTOR: The industrial sector was projected to grow by 6.5pc based upon the Large-Scale Manufacturing target of 6pc. However, with the revised full-year number of LSM for FY22, achieving targeted 6pc growth is now unlikely. Moreover, another challenge for the manufacturing sector is high cost and low supplies of energy inputs.

The construction sector is expected to post healthy growth due to the construction amnesty scheme and concessional credit availability for the housing sector.

The LSM in the 1HFY22 has recorded a growth of 7.4pc compared to 1.2pc over the corresponding period of FY21.

The services sector growth is mostly reliant upon the performance of commodity-producing sectors and imports.

The expected revival in the commodity-producing sector and higher than anticipated growth in imports will push the services sector growth upward.

Higher financial intermediation and 38pc growth in IT-related services will also provide an additional boost to the social and community services sector.

The performance of commodity-producing sectors during 1HFY22 is on track, therefore, the dependent services are also likely to post higher outturns in wholesale and retail trade, transportation and storage.

On fiscal and external accounts, slippages are expected as pressures on imports will only gradually moderate and notwithstanding stellar revenue efforts on the taxation side, the expenditure side will remain under pressure to finance the delivery of social sector services and vaccination rollout programmes.

FDI: Foreign Direct Investment (FDI) during 1HFY22 witnessed a growth of 20pc as compared to last year. Most of the investment has come in financial, communication, oil and gas exploration and power generation sectors.

For domestic investment, credit to the private sector has crossed Rs1 trillion mark for the first time in the history of the country, which shows upbeat market sentiments and appetite for financing.


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