Islamabad February 8 2023: Pakistan’s activity plunged again in December, according to our monthly tracker and we’re slashing our growth forecast for the fiscal year through June by 2.5%, reported by Bloomberg.
Dollar shortages and the government’s curbs on raw material imports compounded problems for businesses already struggling with higher borrowing costs, more expensive input prices and the aftermath of the summer’s devastating floods. Inflation is also eroding consumer purchasing power. We now expect the economy to shrink in the current fiscal year, instead of eking out growth.
Activity fell 11% year on year in December — the seventh consecutive month of decline, according to our tracker.
Activity fell 0.7% compared with November, when it increased 0.8%. It was 10% lower at the end of December than in June.
Bloomberg don’t expect any significant rebound in coming months. The government’s efforts to meet the demands of the International Monetary Fund for aid — letting the rupee float and hiking fuel prices and electricity tariffs — will fuel inflation and squeeze consumers. Higher interest rates will also suppress credit demand, while sagging consumer and business confidence damp activity.
As a result, we are cutting our GDP forecast for fiscal 2023. We now expect a 2.2% contraction in the year through June. Earlier we had expected 0.3% growth.
Our projection is well below the State Bank of Pakistan’s forecast for a 2% expansion. The consensus projection is for 1.5% growth.
