Export target to be missed by wide margin: SBP

[LahoreEstate]

* Second quarterly report states sustained fall in domestic inflation to allow for easing of monetary policy
* Notes reduced pressures on economy due to improvement in fiscal discipline

By Mushfiq Ahmad

KARACHI: Exports during the current fiscal year are expected to yield $18.5 billion to $19.5 billion, much lower than the target of $22.9 billion, the State Bank of Pakistan (SBP) revealed on Saturday in a report on Pakistan’s economy.

The second quarterly report released by the central bank, The State of Pakistan’s Economy, noted that the export earnings were down due to lower prices. It said large-scale manufacturing growth had also been reduced due to a decline in demand from both domestic and international factors.

According to the report, recent trends in most macroeconomic variables suggest that the disciplined implementation of the macroeconomic stabilisation programme is bearing fruit. The realisation of the expected, sustained fall in domestic inflation, and increase in foreign exchange reserves, would allow for the easing of monetary policy.

The report states that industry would remain constrained by other bottlenecks such as energy shortages, high-risk premiums on credit, etc.

The average consumer price index (CPI) inflation for FY09 is also likely to be around 20 percent, much higher than the 11 percent targeted in the beginning of the year, the central bank states. It says the GDP growth is likely to be between 2.5 and 3.5 percent against the target of 5.5 percent. The SBP expects that the government would manage to keep fiscal deficit at 4.3-4.7 percent of GDP as per its target. It said the current account deficit would be between 5.8 percent and 6.2 percent of GDP, down from an earlier estimate of 7.2 percent.

The report also predicted imports during the year to be $30 billion to $31 billion, sharply down from an earlier estimate of $37.2 billion.

Fiscal discipline: The report also pointed out that demand pressures in the economy are easing due to improvement in fiscal discipline, which has complemented a tight monetary policy, APP reported. However, going forward, the report said that worsening outlook for the global economy, and drought in international capital markets, mean that Pakistan’s economic revival strategy must perforce focus on fostering domestic and regional demand.

http://www.dailytimes.com.pk/default.asp...2009_pg7_1