Pakistan Economy_Economic survey FY22_High growth but challenges ahead, (AKD Daily, Jun 10, 2022)
AKD Daily
Pakistan Economy: Economic survey FY22 - High growth but challenges ahead
- On the eve of Federal Budget FY23, Ministry of Finance (MoF) released its yearly economic survey for FY22 which shed light on key economic indicators. The economy recovered from the pandemic induced slowdown (-ve 94% in FY20) and posted V-Shaped recovery where real GDP growth clocked in at 5.97 percent in FY22.
- The growth momentum was observed on account of broad-based expansion in large-scale manufacturing (LSM) and improved crop production. The sector driving the headline growth in FY22 was Industries with a growth of ~7.2%YoY, closely followed by Services sector with a growth of 6.2% while the Agriculture sector posted a growth of 4.4%.
- Given structural imbalances, rapid pace of growth in Pakistan almost always results in external and internal imbalances, however this time, exogenous factors played a critical role. Global recovery from the pandemic along with the Ukraine-Russia conflict resulted in a global commodity super cycle which resulted in a premature end to the country’s growth story.
- The country’s fiscal deficit will settle at ~8% of GDP (PkR5.6trn) during FY22 versus 6% in FY21, while the fiscal deficit during 9MFY22 stood ~4.0% of GDP vs. 3% reported in 9MFY21. This comes on the back of a primary deficit of PkR447bn (0.6%of GDP) in 9MFY22 against a Primary Surplus balance of PkR452bn in 9MFY21. Tax Revenues are up 28%YoY in 9MFY22 to PkR4.8trn, while total expenditures increased by 27%YoY to reach PkR8.4trn.
- Market participation will likely be lackluster today where investors will eagerly await the budget announcement that is scheduled later tonight. Market grapevine suggests that GoP will set very aggressive growth and tax collection targets which are likely to be revised downwards later on. The country requires some tough austerity measures in the budget in order to seal the next IMF tranche.
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