The PTI government’s fiscal tightening to address macroeconomic imbalances has brought down the GDP growth rate from an 11-year high of 5.8% that was achieved in the previous fiscal year during the PML-N government’s tenure. According to the World Bank estimates, the growth rate will decelerate to 3.4% by the end of the ongoing fiscal year and go down further to 2.7% in the coming one i.e. FY20. The growth rate is, however, forecast to recover in FY21 – albeit only to 4% – based on the success of the structural reforms introduced by the incumbent government, and that too in case the international oil prices remain stable and political and security risks remain under control.
The report also warns of inflation turning into a double-digit demon – 13.5% in FY20 – mainly due to the impact of the depreciating rupee. The rising inflation will impact the cost of living, the cost of doing business, mortgages, corporate and government bond yields, and every other facet of the economy. With the report predicting an ‘elevated’ trade deficit in the ongoing fiscal year – only to be narrowed in the two to follow – the figures for investment and productivity will obviously be gloomy. The lone support to the current account balance will come in the form of foreign remittances.
The economy, thus, poses the toughest of the challenges to the PTI that has to come good on its promise of a Madina-like welfare state – something whose signs are highly unlikely to emerge at least in the first three years of this government.
Published in The Express Tribune, April 9th, 2019.
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