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Pakistan’s economic review 2018

In this year high GDP growth in Pakistan will help control the inflation. There is increase in macro sectors of the economy with massive CPEC investment and an improvement in security and power supply. The acceleration in economic growth may affect well for the masses. Democracy will be strengthened with the strong economy in 2018. The loan repayment obligations may be scaring. Pakistan may find itself back in the IMF fold. There will be expansion in the job market and there will be improvement in job situation and salary increase for the working class. The inflation will go up but it is not expected to get out of control. There will be uptrend in the global oil market. The exchange rate may come under pressure and there will be adjustment in the value of the rupee against the dollar.

Pakistanis will be engaged safely in capital formation in the real sector as against those dragging assets through speculative businesses. Speculators may be driven out of the mainstream to watch the economy grow from the sidelines.

Business houses may accelerate their industry and explore new projects in collaboration with Chinese companies. Credit access under the new policy may encourage medium and small enterprises.

The agriculturist will concentrate on trading and industrial sector. The transport, construction and communication may boost the pace of growth in retail and banking may be moderate. The retail sector is expected to expand but the pace may be slower due to uncertain political situation consumers. The brokers’ community, undisturbed by the spot on their credibility in 2017 will continue to do their business as usual.

As regards of the provinces, Punjab will continue to lead while the performance of the other three provinces may be significantly better on both physical and social indicators. It will be unrealistic to expect meaningful structural or taxation reforms in an election year. The progress on the export front will be slow and tiresome. A rise in remittances inflow appears unlikely. The momentum of growth with $25 billion investment in infrastructure under the CPEC will generate enough economic development at a higher speed.

World bank’s projection

The IMF warned that the positive trend will require strengthening the economy’s with greater exchange rate flexibility, fiscal discipline, and an adequately tight monetary policy. In an update of its twice-yearly economic report, the World Bank warned that the economic uptrend this year was temporary. Pakistan is expected to witness a 5.5 percent GDP growth driven by strong domestic consumption. The domestic demand was driven by powerful credit growth and investment.

Recovery was also witnessed in agricultural production on return of normal monsoon rains. Exports are also expected to show recovery with rising investment, the report stated. The country’s construction and services sector will record a strong activity.

As the increase in economic growth will average 5.9 percent in the coming years. The World Bank said that fiscal slippages are the main risk for the economy, and are expected owing to elections and weak tax revenues.

Despite an increase in macroeconomic imbalances in the last financial year the World Bank projects that Pakistan’s GDP growth rate will be 5.5 percent and 5.8 percent for 2017-18 and 2018-19, respectively.

In its Pakistan Development Update, a biannual publication throws light on the state of the economy and its future prospects. The global lender said the economic growth rate projection assumes that oil prices would increase slightly and that “political and security risks will be managed.


llango Patchamuthu, the World Bank’s country director, said: “Pakistan will need to continue with economic reforms and pursue policies that make the country compete better in global markets.”

The World Bank believes that aggregate consumption, one of the key determinants of GDP, will grow because of a marginal recovery in remittances and higher government expenditure due to the election cycle. Country director says Pakistan will need to continue with economic reforms

It expects that the services sector will grow 5.8 percent in 2017-18 against 6 percent in the preceding year due to healthy contribution from the sub-sectors of wholesale and retail trade and transport, storage and communications.

The industrial sector is likely to post a growth of 7 percent against 5 percent in 2016-17. The World Bank estimates that the agriculture sector will expand 2.9 percent in 2017-18 against 3.5 percent a year ago. It notes that capital and financial flows will not fully finance the current account deficit, resulting in a drawdown of foreign exchange reserves.

The fiscal deficit is expected to widen in the election year amidst a slower increase in tax revenues, while inflation will likely reach 6 percent in 2017-18, the World Bank says.

Remittances from the Gulf countries amounted to 62.6 percent of total inflows in 2016-17. Growth in remittances would be subdued going forward, the World Bank said, as Gulf nations make gradual economic recovery.

The World Bank also called for increased rupee flexibility in order to help narrow the trade deficit. The gap between imports and exports of goods widened 37.1 percent year-on-year to $7.2 billion in July-September.

Higher inflation could affect consumption negatively, but the overall impact of a moderate depreciation on growth is likely to be positive.

The country’s ability to withstand external shocks would be compromised with declining reserves and elevated debt rations, the World Bank said.

The Bank says the global economy is set to expand by 3.1 percent in 2018, slightly up from 3 percent last year and marking the first year since the 2008. The pace of world growth was expected to moderate to 3 percent in 2019 and 2.9 percent in 2020. Most of the growth will be driven by emerging economies, in particular commodity exporters, with growth rates for the group as a whole rising to around 4.5 percent in 2018 and an average of 4.7 percent in 2019 and 2020, said the Bank.

Growth in developed economies is projected to slow to 2.2 percent in 2018, from 2.3 percent last year, as central banks gradually remove their post-crisis accommodation and investment levels off. The World Bank projected that global oil prices would average $58 a barrel in 2018, edging up to $59 per barrel in 2019.

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