Economy improves as indicators stay positive, says report

ISLAMABAD (APP) - As the fiscal year 2023-24 is nearing a close, the economy of the country has been showing signs of resilience and growth as indicated by key economic indicators, the finance ministry said in a recent report released here on Wednesday.

“As the fiscal year is about to end, the economic indicators demonstrate the strengthening of stability in the real, fiscal and external sectors,” according to the Monthly Economic Update and Outlook for May 2024.

According to the report, GDP growth is elevating while inflation rates are on a decline with a positive primary balance, reflecting the effectiveness of recent fiscal consolidation efforts. The economic performance also indicates that agriculture has been a major contributor to this fiscal year’s economic upswing, registering a growth of 6.25 per cent.

The agriculture sector’s recovery is mainly attributed to government initiatives through improved input supply and increased credit disbursement to farmers. Large Scale Manufacturing (LSM) growth in 2024 Quarter 3, became positive and is expected to remain moderately positive on average throughout the second half of the current fiscal year. It witnessed a minor decline of 0.1 per cent during July-March FY 2024 against the contraction of 7.0 per cent same period last year. During this period, 11 to 22 sectors witnessed positive growth.

The Consumer Price Index (CPI) inflation stood at 17.3 per cent on a year-on-year basis in April 2024 as compared to 36.4 per cent in April 2023. The major drivers include housing, water, electricity, gas & fuel, perishable food items, furnishing & household equipment maintenance, clothing, footwear and transport.

On the fiscal front, during July-March FY24, the revenue growth outpaced the growth in expenditures. Within revenues, both tax and non-tax collection grew significantly by 29.3 per cent and 90.7 per cent, respectively. Moreover, measures to control non-mark-up spending helped in improving the primary surplus to Rs 1615.4 billion (1.5 per cent of GDP) from Rs 503.8 billion (0.6 per cent of GDP) last year.

While, the overall fiscal deficit remained at 3.7 per cent of GDP, the same as recorded last year. On the external front, the current account for FY2024 (July-April) narrowed down significantly, recording a deficit of $0.2 billion compared to last year’s $3.9 billion, primarily due to an improved trade balance.

In April 2024, the current account surplus was recorded at $491 million, an increase from $434 million in March 2024. Year-on-year, exports in April 2024 increased by 23.4 per cent to $2.6 billion, fueled by eased import restrictions that enhanced the supply chain for export industries. In the same period, imports also rose by 22.8 per cent to $4.4 billion. The trade deficit for April 2024 was recorded at $1.8 billion. Furthermore, the FDI witnessed an increase of 39.1 per cent and reached $ 358.8 million in April 2024, as against an inflow of $ 258.0 million last month. The remittances in April 2024 were encouraging, as they increased on a year-on-year basis by 27.9% to $ 2.8 billion.

On the back of a persistent policy rate at 22 per cent, during 1st July-03rd May, FY2024 money supply (M2) shows a growth of 7.1 per cent (Rs 2,229.8 billion) as compared to 7.0 per cent growth (Rs 1,943.4 billion) in last year. Although the signs of a moderate economic recovery are evident. But to sustain this positive momentum, the policy efforts and reforms to raise productivity, and competitiveness are imperative. In Jul-Apr FY2024, workers’ remittances recorded at $ 23.8 billion ($ 23.0 billion last year), increased by 3.5 percent.

YoY remittances increased by 27.9 per cent in April 2024 ($ 2.8 billion) as compared to April 2023($ 2.2 billion). However, MoM remittances declined by 4.8 per cent as compared to March 2024 ($ 3.0 billion) mainly owing to Post Eid factors.

Pakistan’s total liquid foreign exchange reserves increased to $ 14.3 billion on May 24, 2024, with SBP’s reserves stood at $ 9.1 billion and Commercial banks’ reserves remained at $ 5.2 billion. “Going forward, the economy will gain momentum in the coming months of this fiscal year,” it adds.