News
Tuesday, October 26, 2010
Key macroeconomic indicators likely to miss target: SBP
* Bank forecasts GDP growth rate likely to be between 2 and 3pc against 4.5pc annual target
* Inflation may rise to 13.5pc compared with annual target of 9.5pc
* Fiscal deficit likely to surge to 5 to 6pc versus 4pc
* Imports likely to increase
By Muhammad Yasir
KARACHI: The State Bank of Pakistan (SBP) forecast that the country’s economy would face a challenging situation, as all the key indicators would miss their set targets on the massive fallout of floods.
The GDP growth rate would settle down between two and three percent against its 4.5 percent annual target; inflation would rise to 13.5 percent compared with the annual target of 9.5; the current account deficit would widen to three to four percent against the target of 3.5 percent; fiscal deficit would surge to five to six percent versus the four percent target and imports would increase to $34-35 billion against $31.7 billion set in fiscal year 2010-11. The State Bank of Pakistan’s annual reports stated that the macroeconomic framework embedded in the FY11 Annual Development Programme targets had suffered serious setbacks early into the year as large areas of the country had been devastated by widespread rains and unprecedented floods.
The relief and rehabilitation task is gigantic, and despite considerable international assistance and large-scale public mobilisation, the resources available were likely to be inadequate against the anticipated needs.
The cursory assessment of the broad contours of floods losses indicated that their repercussions would continue to stress the economy for many years, the SBP predicted in its report. It is therefore obvious that the economic priorities and targets for FY11, in particular, would see a substantial revision, and all key macroeconomic indicators would likely record deterioration. Large parts of the country’s agricultural heartland had been particularly hit hard by the floods, with significant damages to the standing kharif crops – cotton, rice and, sugarcane – and livestock.
The SBP report mentioned that the economy had also suffered extensive damage to infrastructure – bridges, road networks, gas/power plants, and some industrial units such as rice mills, ginning factories, etc, productivity losses from supply disruptions, the large-scale displacement of people, etc.
Demands on the public exchequer were expected to rise sharply in FY11 to finance relief and reconstruction activities in the wake of the floods. The government correctly proposed to extract a temporary enhancement in revenue from the relatively affluent segments of the tax base, but the needs were still likely to exceed any reasonable increase in receipts.
Courtesy www.dailytimes.com.pk