SBP fears country will miss 4% growth target

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KARACHI: The State Bank of Pakistan (SBP) has voiced fear that the country will miss the economic growth target of 4% as two major sectors – agriculture and industries – have failed to perform well in the ongoing fiscal year.
The central bank, however, foresaw a notable drop in the current account deficit, projecting the deficit would remain in the range of 1.5% to 2.5% of gross domestic product (GDP) compared to the 3% target for the year.
The drop is expected on the back of a massive reduction in imports, which is expected to offset the impact of low foreign income on account of sluggish exports and stagnant workers’ remittances.
“Achieving the real GDP growth target of 4% appears unlikely,” the SBP said in its first-quarter (Jul-Sept FY20) report on the state of Pakistan’s economy released on Monday.
Earlier, the central bank projected GDP growth in the range of 3-4%, most likely 3.5%, in FY20. Such projection is, however, missing in the latest quarterly report, thus, strengthening doubts about economic slowdown to 2.4% in the year.
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“GDP growth is targeted at 4% with agriculture (growth at) 3.5%, industry 2.2% and services 4.8%… The current account deficit will be hovering around 3% of GDP,” Planning Commission said in its Annual Plan 2019-20.
The country recorded a nine-year low GDP growth of 3.3% in the previous fiscal year ended June 30, 2019.
“In case of agriculture, targets for the overall crop sector may not be achieved as production of both cotton and sugarcane is estimated to remain lower than FY19 figures. The industrial sector is also expected to remain under stress. The latest large-scale manufacturing (LSM) estimates for October 2019 show an 8% decline on a year-on-year basis, steeper than the 5.9% drop recorded in the first quarter of FY20,” the central bank elaborated.
With the increase in financial and operational costs, a number of industries, including steel, automobile, chemical and cement, slashed their production levels. Furthermore, the government’s policy to shift away from furnace oil in power generation forced local refineries to scale back their operations, the SBP said.

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