SBP cites global trade disruptions as major risk to Pakistan’s economic outlook

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The State Bank of Pakistan (SBP) on Monday indicated the potential threats of the country’s mid -term economic approach to global trade barriers and commodity prices after Washington mutual rates.

In the economy of its state of Pakistan, in a half -year report, the Central Bank outlined the key threats of the mid -term economic approach.

It said these risks are widespread in the light of massive trade barriers and mutual prices, fluctuations in commodity prices, changing geographical political situation, adjustment in energy prices, reaction to domestic demand in various financial measures, and international currencies on local currencies.

According to the report, Pakistan’s economic society has improved further in the first half of the FY 2024-25 (H1-FY25), which shows a steep disinformation, a surplus current account, and a financial deficit.

The H1-FY25 report states that the balance of the current account has turned into a surplus, and the fiscal deficit was reached the lowest level after the financial year 05, the H1-FY25 report states that these favorable results were attributed to the position of calibration monetary policy.

In this report, the fiscal year 25 to 3.5 % range is in the financial year 25 GDP growth, average inflation is between 5.5 and 7.5 %, and the current account balance is in the range of 0.5 % to 0.5 %, with continuous strong pace in remittances and exports of workers.

It has observed that by March 2025, the head inflation has reached a low level of 0.7 %, due to a confluence of factors, which includes a strict monetary policy stand and financial stability, which has given domestic demand, improve supply, improve energy prices, and international prices.

As a result of cooling inflation and a better inflation approach, the SBP reduced the policy rate from 1000 twenty points from June 2024 to February 2025.

The SBP noted that in financial conditions, ease, economic activity and ADR-related loans increased slightly, which played a vital role in the private sector credit during the H1-FY25.

In the report, the SBP changed the real GDP growth from 2.5 to 3.5 percent, however, highlighting the negative risks in the form of additional financial stability and the minimum expected wheat crops.

The central bank described the lower production of key Kharif crops during the H1-FY25 and the contraction in industrial activity as the major reasons for the real GDP growth.

The Kharif crops were seen due to a wide range of cultivation and falling area under low production, the report pointed to the “key role of the uncertainty of agriculture policy, low prices of last year, inappropriate weather conditions, and low use of certified seeds and other inputs”.

In addition, the report observes that the services department performed relatively better in H1-FY25 compared to the same period last year.

It also mentions that during the H1-FY25 last year, low-contraction in the industry was supported by small-scale manufacturing, utility, and slaughter, while mining and excavation, construction, and large-scale manufacturing played a negative role.

According to the report, permanent increase in exports and workers’ remittances during H1-FY25 has increased significant imports, which has led to an increase in the balance of the current account.

Along with these progress, the first installment under the IMF’s EFF and a little pickup in private arrival, the SBP’s foreign exchange reserves have been strengthened. The report notes a significant improvement in inflation and external sector views.

The average inflation in SBP projects is expected to fall from 5.5 to 7.5 percent, in view of the strict monetary policy stance, ongoing financial stability, and softening global commodity prices, in view of disinfecting, in view of the dispensation of global commodities.

Similarly, the balance in the current account is now likely to be in the range of GDP -0.5 to 0.5 %. The report is expected to continue to increase imports in the remittances and exports of workers. It is expected to help strengthen cushions and external buffers against less financial arrival.

The report also includes a special chapter titled Pakistan’s low competition: a case of investing in productivity, which analyzes that the weakening of labor productivity and total element production capacity has negatively impacted the country’s economic competitiveness over time, which has repeatedly helped the boombest bicycles.