Economic environment continues to remain conducive for growth:SBP

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KARACHI, March 31 (APP): The overall economic environment remains
conducive for growth, says a report of the State Bank of Pakistan
(SBP).
The SBP on Friday released its Second Quarterly Report for the
fiscal year 2017 (FY17) on the State of Pakistan’s Economy.
The Report says that the overall economic environment remains
conducive for growth, on the back of accommodative monetary policy,
increase in development spending, and CPEC-inspired activities.
It has also noted the improvements in investors’ confidence as
reflected in an uptick in private sector credit, especially for fixed
investment purposes; foreign interests in Pakistani companies; and
increased production of consumer durables.
Similarly, a surge in import of machinery and raw materials also
points to a robust industrial activity and buildup of future
productive capacity.
According to the Report, the growth in Large-scale Manufacturing
(LSM) recovered in the Quarter two-Q2-FY17 with increase in production
of food, cement, steel, pharmaceuticals, automobiles, and electronic
industries.
The growth in agricultural sector is also expected to rebound on
account of higher production of cotton, sugarcane, and maize and
increased prospects for wheat harvest close to last year after rains
in early February 2017.
The Report highlights that current account deficit has almost
doubled compared to the last year. This was due to a surge in
growth-inducing imports along with non-realization of CSF and decline
in exports and remittances.
On an encouraging note, the Report acknowledges that the foreign
inflows- FDI, loans, and Sukuk issuance, were little more than
sufficient to finance higher current account deficit.
The Report, nevertheless, highlights the need to contain current
account deficit to manageable levels to sustain external sector
stability.
The Report also notes that fiscal deficit has increased due to
low revenue generation amid higher development and security related
spending. While the Report terms sustained increase in development
spending commendable, it also underscores the need to enhance revenue collection.
The Report shows that average CPI inflation has risen from 2.1
percent in H1-FY16 to 3.9 percent as in H1-FY17 which reflects higher
domestic demand and an increase in global commodity prices. However,
it highlights that on year-on-year basis, the CPI inflation has
fluctuated in a narrow range during this period.
Finally, the Report perceives the growth to maintain the upward
trajectory while inflation to remain below the target during FY17.