Gloomy GDP projection

Apart from the Ukraine war and the 2022 floods, SBP, in its annual report, is mostly blaming anti-inflation measures

The SBP is already revising down GDP growth projections for the year, a worrying sign that the economy is still nowhere near being on the right path. It has happened despite several measures that were supposed to bring stability, we cannot even be sure that it is moving in a direction that even leads to the right path. Despite being a slight improvement on the abysmal 0.29% growth rate for the previous fiscal year, the current projection remains well under 3%, which is among the lowest in the developing world. Even the initial forecast of 3.5% was nothing to toot any horns over.

Apart from the Ukraine war and the 2022 floods, the SBP, in its annual report, is mostly blaming anti-inflation measures, which lead to lower economic activity due to reduced consumption and investment. Although some of the measures are being rolled back amid “early signs of improvement”, their impact will linger on for several months and years. The SBP is also banking on improved global growth prospects having a positive knock-on effect on Pakistan. A pessimist, however, would see this as an admission that what little growth occurs will mostly be attributable to external factors, rather than any economic wizardry on the part of any elected or caretaker government. Meanwhile, remittances — our ever-reliable forex cushion — are expected to go down, which could be a problem.

As for areas of improvement, the report says more reforms are necessary, especially relating to tax policy and public sector enterprises. But it goes on to say reforms are also needed to increase investment, improve export industries and agriculture sector efficiency, reduce poverty and improve social welfare and general living standards. If the report were any more blunt, it could have just said everything needs to be fixed. And in a way, it actually did, when it called for reforming the National Statistical System to ensure “the availability of factual information” for policymakers. It is not much of a surprise that unreliable information has contributed to unreliable policies.

Published in The Express Tribune, October 26^th, 2023.

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