Pakistan industry to grow by 7 pc in FY18, exports to record recovery: World Bank
World Bank released a report on Thursday....
KARACHI (Dunya News) - World Bank expects industrial growth would be higher during the current fiscal year compared with last preceding year on improve electricity supply and continued activity under CPEC, this would also geared up the exports in FY18 and FY19.
According to a report of World Bank released on Thursday revealed that the impetus to growth is projected to come from the services and industry sectors .
The services sector is expected to grow by 5.8 percent in FY18, compared to 6.0 percent in the previous fiscal year due to healthy growth in wholesale and retail trade, and transport, storage, and communications. Growth in the industry is expected to increase to 7.0 percent in FY18, compared to 5.0 percent in FY17, benefitting from an improved electricity supply and continued construction activity under CPEC during FY18. The agricultural sector’s performance is expected to remain robust, with major contributions coming from the crops sector, particularly cotton and rice.
The pressure on the current account is expected to continue as the trade deficit will persist during FY18 and FY19. This situation could potentially become unsustainable in the absence of timely corrective policy measures. Exports are expected to recover during FY18 and FY19 as supply-side factors ease, including an improved electricity supply and low domestic lending rates. This expectation is also supported by the double-digit growth recorded in exports during the first quarter of FY18. Imports, after touching 17.6 percent (y-o-y) growth in FY17, are expected to grow at a slower pace in FY18 and FY19.
The slowdown in imports is mainly due to the high import base in FY17. Supported by a marginal improvement in the economic outlook of the GCC economies, remittance inflows will continue to partly finance the high trade deficit. Increased exchange rate flexibility could result in a depreciation of the Pakistani rupee, which may alleviate some of the pressure on the external account. It is also expected that FDI flows will strengthen with the accelerated implementation of CPEC projects. Capital and financial flows during FY18 and FY19 will not fully finance the current account deficit, which will result in a drawdown of reserves during these two years.
Fiscal slippages are expected to continue through the election cycle, which will further widen the fiscal deficit during FY18, compared to the 5.8 percent fiscal deficit in FY17. This increase in the fiscal deficit will be driven primarily by a slower increase in government tax revenues (both federal and provincial) and a sharper increase in expenditures.
An adjustment in the fiscal position in FY19 post-election will help curtail the fiscal deficit. Inflation, after remaining moderate during FY17, is expected to rise steadily in FY18 and FY19. This increase will be driven by higher domestic demand and a slight increase in international oil prices.
