Economic recovery may accelerate in coming months, predicts MoF.

ISLAMABAD -- The Ministry of Finance (MoF) has observed that overall economic recovery is on its way and may accelerate in the coming months as industrial sector has started showing robust growth.

'The timely measures of the government are supportive in spurring economic growth, decelerating inflation and at the same time preserving external balance,' the Ministry of Finance has noted in its Monthly Economic Update and Outlook. It added that prospects of economic growth are showing visible signs of improvement during seven months (July-January) of the current fiscal year (FY 2021) which strengthen expectations about economic recovery.

The government's timely measures against the pandemic in terms of fiscal stimulus, easing mobility restrictions, timely arrangement of vaccination, together with accommodative monetary policy allowed economic activities continue in the difficult time. The report stated that the resurgence of the COVID-19 infection placed considerable strain on the fiscal side of the economy during the first half of the current fiscal year. Despite significant challenges, the revenues side performed better on the back of improved tax collection both at the federal and provincial level. The performance is an indication of growing economic activity even in the wake of challenges posed by second wave of the pandemic. This implies that, as economic activity accelerates further, there would be more increase in revenues. On the other hand, the expenditure side is expected to remain under pressure due to COVID related expenditures.

The Ministry of Finance believed that Pakistan's trade balance is expected to show further improvement as compared to the two previous months. After a very strong monthly, increase in December 2020, partly due to seasonal effects, imports came back to the normal levels in Jan 2021, resulting in a MoM improvement in the trade balance. Although they remain supported by the ongoing economic recovery and further increases in international commodity prices, imports in February 2021 are expected to remain lower or at around the same level observed in Jan 2021. On the other hand, incentives provided to export-oriented industries, exports are expected to kick off up to a higher level. Regarding remittance inflows, these remained strong and still expected to provide support to finance trade deficit.

Recent developments in inflation, shows that, both YoY and MoM inflation is on a negative trend in recent months...

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