December 27, 2023 (MLN): Pakistan’s economic recovery process continues at a steady pace, bolstering business confidence and market sentiment, according to the monthly Economic Update and Outlook for December 2023.

According to the document released by the Finance Ministry, in November 2023, the Pakistan Stock Exchange (PSX) showcased outstanding performance.

The sustained rise in the PSX index over the past five months indicates an improvement in the overall health of the economy and signals a positive economic outlook for the ongoing fiscal year.

Real sector

The real sector is experiencing mixed performance across the economic sectors.

In agriculture sector, the prospects for achieving production targets are positive.

During the Rabi season of 2023-24, wheat cultivation nearly met its planned area.

Notably, Punjab exceeded its wheat sowing target by 2%. Farm inputs have also observed an upward trend.

Farm tractor production and sales exhibited growth of 60.7% and 98.2%, respectively, during Jul-Nov FY2024, compared to the corresponding period last year.

Similarly, during Oct-Nov 2023, there was a 5.6% increase in Urea and a 42% increase in DAP offtake compared to the same period last year, indicating positive growth in Rabi crops.

However, LSM sector demonstrated a minor negative growth of 0.4% during Jul-Oct FY2024, compared to the contraction of 1.7% in the previous year.

A mixed trend was observed at the sub-sector level: 12 out of 22 sectors witnessed positive growth which include.

Inflation

In November 2023, the CPI inflation recorded at 29.2% on a YoY basis, up from 23.8% in November 2022. The major contributors to this rise include food and non-alcoholic beverages, housing, water, electricity, gas and fuel, transport, and the maintenance of furnishings and household equipment

Fiscal sector

Fiscal side highlights the successful implementation of consolidation measures in the first four months of FY2024, leading to a significant rise in total revenue receipts that outpaced the growth in expenditures.

Consequently, the fiscal deficit has been curtailed to 0.8% of GDP, and the primary surplus has improved to Rs1,43 trillion during Jul-Nov FY2024.

External sector

On the external front, the global economic growth is expected to improve in 2023, largely due to increased consumer spending in China and accelerated growth in the U.S.

This positive change has helped mitigate the significant slowdown that Europe experienced in 2022, caused by an energy crisis.

The external sector indicators show a strong recovery during Jul-Nov FY2024. YoY exports increased by 21.5% in November 2023 whereas imports increased by 2.9%.

This increase is attributed to eased import restrictions, resulting in a smoother supply of raw materials for export-oriented industries.

Based on the improved trade balance, the Current Account posted a deficit of $1.16 billion for Jul-Nov FY2024, in contrast to a deficit of $3.3bn in the previous year.

FDI reached $656.1 million during Jul-Nov FY2024, an increase of 8.1% largely due to Chinese investments.

YoY remittances grew by 3.6% in November on the back of structural reforms related to exchange companies and consequent convergence of exchange rate in interbank and open market.

Monetary Policy

The Monetary Policy Committee (MPC) decided to maintain the policy rate at 22% during its meeting on December 12, 2023. The MPC assessed that the real interest rate remains positive on a 12-month forward-looking basis.

Further the committee is optimistic that the headline inflation rate will decline in the upcoming months of FY2024.

This anticipated decrease is likely attributed to the easing of supply constraints, particularly in agricultural products, and a moderation in international commodity prices.

Copyright Mettis Link News

Posted on: 2023-12-27T16:38:22+05:00