The State Bank of Pakistan (SBP) said that the revised GDP growth target of 3% was impossible to achieve even after overlooking the economic impact of the pandemic because the agricultural and large-scale manufacturing sectors failed to make up for the domestic market development.
In the Second Quarterly Report on Pakistan’s Economy State, Central Bank said that the estimates are likely to be further revised downwards as stabilization optimism is now subject to risks emerging from COVID-19’s global and domestic spread.
The report deals mainly with the pre-coronavirus economic performance but it also addresses the severe and devastating economic effects of the pandemic. It states that the situation is extremely volatile and highly unpredictable and that the economic outlook remains subdued relative to forecasts of pre-outbreak.
“COVID-19’s global and domestic spread that has brought numerous challenges to the country,” it said, adding that nation-wide spillovers from the global economy and containment measures are bound to weaken economic activity, market demand, and adverse effect supply.
“The current account numbers were getting better every month, the foreign exchange reserves were shoring up steadily. In addition, headline inflation was expected to revert to the medium-term target of 5% to 7% over the next 24 months,” the report added.
The estimate of GDP growth has been revised downwards to 3% but is likely to be further revised downwards as things go from bad to worse. The World Bank and International Monetary Fund have also revised Pakistan’s growth forecasts to 1.3pc or even lower for the current fiscal year.
As per the report, the overall revenue target was missed, highlighting the scope for greater efforts to broaden the tax base and increase documentation in the economy.
The primary budget reported a surplus, while the fiscal deficit was at 1HFY20 compared with last year’s same period.
“This was due to significant growth in revenues despite a slowdown in the economy and the compression in imports. The reversal of earlier tax concessions and implementation of new levies helped increase the revenue collection,” said the report.
Furthermore, the remittances from major destinations may drop temporarily in the coming months. However, According to the SBP financial markets also have come under severe pressure.