Optimistic Economic Outlook Despite Challenges

APP

Islamabad: Despite significant challenges, the overall economic outlook remained optimistic, marked by receding inflationary pressures, positive prospects in agriculture, signs of potential recovery in the industrial sector, imports, and a favorable external environment.

According to the Monthly Economic Update and Outlook for December issued by the Ministry of Finance, the optimistic economic outlook is also evident by the 2.13 percent growth achieved in the first quarter of FY2024, largely contributed by agriculture and industry.

Further, the report says the twin deficit is on a downward trajectory, signifying better economic management to reduce the macroeconomic imbalances.

“This lays the foundation for progressing towards higher and sustainable economic growth. It is therefore expected that this positive momentum will further strengthen in the upcoming months,” the report adds.

Meanwhile, the report says for the Rabi season 2023–24, a wheat crop has been cultivated on an estimated area of 8.733 million hectares, against the target of 8.998 million hectares to achieve the production target of 32.3 million metric tonnes.

Punjab has surpassed its sowing target (6.475 million hectares) by 2 percent to 6.592 million hectares, while in other provinces it is in progress.

Large-Scale Manufacturing (LSM) declined by 0.4 percent during July–October FY 2024, compared to the contraction of 1.7 percent in the same period last year. In October 2023, LSM decreased by 4.1 percent on a year-over-year (YoY) basis, compared to -1.4 percent in the same month last year.

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On a monthly basis, it declined by 2.0 percent in October against a decrease of 3.2 percent in September. During July–October FY2024, 12 out of 22 sectors witnessed positive growth. These include food, beverages, coke and petroleum products, wearing apparel, leather, chemicals, pharmaceuticals, non-metallic mineral products, rubber products, fabricated metals, machinery and equipment, and others (football).

The Consumer Price Index (CPI) inflation recorded 29.2 percent on a YoY basis in November 2023, compared to 23.8 percent in November 2022. During July–November FY 2024, CPI stood at 28.6 percent, up from 25.1 percent in the same period last year. On average, it increased to 2.7 percent in November 2023, compared to an increase of 1.0 percent in the previous month.

The Sensitive Price Index (SPI) for the week ended on December 21, 2023, recorded a decline of 0.51 percent as compared to the previous week. Prices of 9 items declined, 24 items remained stable, and 18 items increased.

A substantial increase in revenues compared to expenditures brought down the fiscal deficit to 0.8 percent of gross domestic product (GDP) (Rs.861.7 billion) in July-October FY2024 from 1.5 percent of GDP (Rs.1265.8 billion) last year.

The primary surplus continued to improve owing to contained growth in no markup spending and recorded Rs. 1429.7 billion (1.4 percent of GDP) during July–October FY2024, up from Rs. 136.2 billion (0.2 percent of GDP) last year.

The net federal revenue receipts increased to Rs. 2806.6 billion in July–October FY2024 from Rs. 1316.8 billion last year. The sharp rise in revenues has been largely attributed to a considerable improvement in non-tax revenues, which grew by more than 300 percent during the period under review.

In absolute terms, it increased to Rs. 1586.5 billion against Rs. 346.4 billion last year. This growth in non-tax collection has been observed across all major heads, indicating a broad-based increase. Similarly, receipts from Federal Board of Revenue (FBR) tax collections grew by 29 percent to Rs. 2748.4 billion, up from Rs. 2138.7 billion last year.

The net provisional FBR tax collection maintained its momentum with 29.6 percent growth to reach Rs. 3484.7 billion during July–November FY2024 from Rs. 2688.4 billion last year. Within total, domestic tax revenues grew by 32 percent, driven primarily by a 62.8 percent surge in Federal Excise Duty (FED) and a 42.2 percent rise in direct taxes.