Rising inflation to restrict economic growth

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday cautioned the authorities that inflation rate above 6% can deter economic growth during the post-corona period and stressed the need for a careful strategy to keep inflation in control.

In a statement, FPCCI President Mian Anjum Nisar said inflation was recorded at over 9% in September against a stable annual inflation rate of 1.2% across the world amidst dropping food and energy prices.

He called for putting the national economy on a balanced and sustainable growth trajectory, and addressing the underlying structural vulnerabilities as low export growth, limited foreign exchange reserves, lack of documentation of economy and higher food inflation were still major challenges.

Nisar stated that there was a consensus that a low inflation rate aided economic activities while high inflation hurt economic growth.

“High inflation affects decision-making by all economic players, like investors, savers, consumers and producers through uncertainty about expected payoffs from their decisions,” he said, adding, “a persistently high inflation also causes erosion of the value of local currency. Such uncertainties, in turn, have adverse implications for economic activities.”

The FPCCI chief said low inflation helped economic agents to predict the outcome of their economic decisions with a fair level of certainty. “Especially, producers follow their plans for business expansion with more confidence and new investment is undertaken in expectation of predictable returns,” he added. Nisar stressed the need for building on gains on the ease of doing business, which required capacity development of key public institutions, along with continued dialogue with relevant stakeholders. He urged the government to come up with an out-of-the-box solution to expedite economic activities in the country.

The FPCCI president lamented that regular increase in oil, gas and power rates and rupee depreciation were posing a threat to all sectors of the economy, besides making the life of common man miserable.

Published in The Express Tribune, October 18^th, 2020.

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