ISLAMABAD: The Annual Plan Coordination Committee (APCC) has approved the macroeconomic framework for the fiscal year 2022-23, which calls for a 5% real GDP growth rate and an average inflation rate of 11.5 percent.
The administration also said that the inflation goal was missed since it was expected to be around 8% on the eve of the penultimate budget for 2021-22, but it had already risen to 13.3% in preliminary projections.
The 5.97 percent GDP growth rate was also agreed upon during the APCC conference.
Independent economists such as Dr. Hafiz A Pasha had forecast that the CPI will rise to 25% in the following fiscal year due to increasing administrative costs of utilities and greater taxes, while the government’s expected inflation is hovering around 11.5 percent for the next fiscal year.
The government expects a current account deficit of 2.1 percent of GDP, or more than $10 billion, in the next fiscal year.
The APCC approved macroeconomic framework, which states that with the likely resumption of the IMF programme, the economic outlook for the next fiscal year 2022-23 is expected to result in an orderly rebalancing between imperatives of economic growth and addressing external sector vulnerabilities, particularly in light of the magnitude of the global slowdown and the expected abatement of global inflation in commodity prices and the stability of exchange rate movements.
Economic growth will be slowed by fiscal adjustment measures, resolving a deteriorating trade deficit, and reducing political and economic uncertainty. In light of the foreign and domestic economic uncertainty, GDP growth is expected to slow somewhat to 5% in 2022-23, with agriculture (3.9%), manufacturing (7.1%), and the services sector accounting for the majority of the increase (5.1 percent ).
Because of the fiscal and current account constraints, the investment will be slowed. As global inflationary pressures do not ease fast, inflation will remain in double digits.
Farm’s predicted growth rate of 3.9 percent is largely dependent on the resurrection of cotton and wheat output, as well as the steady supply of water, certified seeds, fertilizers, pesticides, and agriculture financing facilities. The revival of both of these crops would not only help to maintain growth momentum, but it will also help to relieve BoP constraints by lowering import needs.
Increased production capacity during the last two years is likely to underpin the economic momentum, which will be reduced as a result of fiscal austerity measures.
During 2022-23, the broad-based rebound of LSM is expected to keep growth at 7.4%. High energy input costs and scarcity, currency rate concerns, and supply shocks connected to the Russia-Ukraine conflict all pose negative risks to the industrial sector. During the years 2022-2023, the manufacturing industry is expected to develop at a rate of 7.1 percent.
The services sector will also see a slowdown in growth, with growth expected to slow to 5.1 percent in 2022-23, which is still lower than the 5.3 percent annual average growth seen in the five years before Covid-19. Both the agricultural and industrial sectors are expected to do well, complementing the anticipated expansion in the services sector.
Furthermore, owing to the stabilization and uncertain economic climate, investment is predicted to drop slightly to 14.7 percent of GDP in 2022-23.
On a nominal level, fixed investment is predicted to expand by 13%; however, as a proportion of GDP, it will fall somewhat from last year and will stay around 13% of GDP in 2022-23. For the next fiscal year, the national savings rate is expected to be 12.5 percent of GDP.