SBP growth forecast

The SBP is blaming the summer floods and the efforts of the government and the bank itself to stablise the economy for its latest projection that GDP growth will fail to meet the already-low earlier target range of 3% to 4%. While the SBP did not give a precise estimate, international analysts have pegged growth estimates at around 2%, a very low figure for a developing country. The SBP’s annual report also says growth for the previous financial year stood at 6% — reasonable, albeit unimpressive for a developing country — and blames “a combination of adverse global and domestic developments led to the reemergence of macroeconomic imbalances”, for holding it back.

Interestingly, the growth figure for last year was attributed to the expansion of large-scale manufacturing and improved agricultural output — the crisis of the current fiscal year is being partly attributed to the high imports on the back of which that very same industrial expansion took place, and crop failures caused by the floods and other unavoidable factors. Still, the bank blamed the floods for derailing economic stabilisation efforts and causing long-lasting economic damage, as agriculture losses will continue handicapping the rest of the economy for several months to come, while infrastructure losses may take years to address.

Concerningly, some analysts credited the extremely gloomy economic outlook presented by the SBP as the reason why it avoided offering up its own growth estimate. This would suggest that the foreign analysts’ 2% estimates are actually optimistic. Indeed, without access to electricity and gas for production, or dollars to import raw materials, several industries — including export-oriented ones — are on their last legs, and potentially millions of jobs could hang in the balance. Textile industry lobbyists claim about 500,000 people in their field alone have already lost their jobs.

Published in The Express Tribune, December 24^th, 2022.

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