Pakistan's economic development momentum is improving
Recently, Fitch, an international rating agency, forecasts that Pakistan’s real gross domestic product (GDP) growth rate will reach 4.2% in fiscal year 2021/2022 (July 2021 to June 2022), up from 3.9% in fiscal year 2020/2021 . The reason for Fitch's upward revision of Pakistan's GDP growth forecast is mainly because of the increase in the domestic new crown pneumonia vaccination rate, and the implementation of loose monetary policy and proactive fiscal policy by the Pakistani government, which have made Pakistan's economic development momentum even better.
Earlier this year, the Asian Development Bank also gave a more optimistic estimate of Pakistan's economic growth this fiscal year. According to ADB's 2021 Asian Development Outlook released this year, Pakistan's business activities began to gradually recover in the second year after the outbreak of the new crown pneumonia epidemic, and Pakistan's GDP growth rate is expected to reach 4% in the 2021/2022 fiscal year. ADB believes that the confidence of domestic consumers and businesses has rebounded in the 2021/2022 fiscal year, and the Pakistani government has also announced in the budget for this fiscal year that it will implement various economic stimulus measures. These factors have jointly promoted domestic private sector. The increase in investment has made the prospects for Pakistan's economic recovery more clear.
Of course, while many institutions are optimistic about Pakistan's GDP growth prospects this fiscal year, many analysts also point out that Pakistan's domestic economic development is facing a certain risk of overheating. Due to the current strong domestic demand, import growth will be faster than export growth, coupled with the important factor of rising international oil prices, Pakistan's foreign exchange reserves and rupee exchange rate will face greater pressure in the future. At the same time, the surrounding geopolitical environment of Pakistan has undergone great changes, which is also a major problem that the country has to pay attention to on the road of economic growth.
The Pakistani government has been alert to the risk of "overheating economy". Recently, Pakistan's Minister of Finance Shaukat announced that he will take a number of restrictive measures to "cool down" the currently overheated economy, including requiring importers to pay cash deposits equivalent to 100% of the value of imported goods, and levying regulatory taxes on imported goods. , the purpose is to restrict imports, especially to reduce imports of non-essential goods. Meanwhile, Pakistan's central bank has raised the discount rate by 0.25% and said it will raise it further in due course, dampening the "heat" of the economy. In fact, the Pakistani government's previous efforts to "cool down" economic growth and reduce inflation have begun to bear fruit. In recent years, the domestic inflation rate has declined. According to the latest figures from Pakistan's Ministry of Finance, food inflation has declined over the past few months. In July, food inflation in Pakistan's urban and rural areas was 15% and 17%, respectively. By September, the two figures had fallen to 9.1% and 10%, respectively.
After experiencing the great impact of the epidemic, various economic policies in Pakistan have now begun to play a role, and the domestic economy has slowly emerged from the haze. Despite this, the road to Pakistan's economic recovery still faces many challenges. Although the domestic environment has improved, the external situation facing Pakistan is still relatively severe due to the sudden change in the surrounding situation, which has brought many difficulties to Pakistan's future economic development.
