Islamabad : Jan 31, 2024: A monthly economic outlook issued by the Finance and Revenue Division on Wednesday said in the first half of Y2024, macroeconomic conditions have gradually improved, leading to a revival in overall economic activity compared to the challenging FY2023. This persistent uptick in economic indicators has resulted in improved GDP growth of 2.13% in the first quarter of FY2024, with expectations for continued growth in the second quarter. Business confidence and the investment climate are gradually improving, as reflected in the exceptional performance of the Pakistan Stock Exchange (PSX) and a steep surge in FDI. The continual rise in these indicators is a testament to the strengthening health of
the economy and suggests a positive
economic outlook for the latter half of
FY2024.
The real sector’s indicators are largely
showing positive trends. In agriculture
sector, Wheat cultivation have exceeded the target by 1.8 percent in the Rabi season of 2023-24, aiming for a production of 32.12 million tonnes. This increase is attributed to favorable climatic conditions and effective
government interventions including
improved seed availability, agricultural
credit, machinery, and fertilizers. During JulDec FY2024, significant growth was observed in farm tractor production and sales, with increases of 67.5 percent and 103.3 percent respectively. Agricultural credit disbursement also increased by 28.5
percent, reaching Rs 853.0 billion. However, there was a mixed trend in fertilizer usage, with Urea offtake decreasing by 8 percent and DAP offtake increasing by 23.7 percent
compared to the previous Rabi season.
The LSM sector is also on a recovery path. In November 2023, LSM increased by 1.6 percent on a YoY basis and 3.6 percent on a MoM basis. However, it declined by 0.8 percent during July-November FY2024, compared to a contraction of 2.3 percent in
the same period last year. At the sub-sector level, 12 out of 22 sectors experienced positive growth, including Food, Beverages, Wearing Apparel, Leather, Coke & Petroleum Products, Chemicals,
Pharmaceuticals, Non-Metallic Mineral
Products, Rubber Products, Wood
Products, Machinery and Equipment, and
Others (Football). In contrast, negative
growth was observed in Tobacco, Textiles, Paper & Board, Iron & Steel Products, Fabricated Metal, Computers, Electronics & Optical Products, Automobiles, Electrical Equipment, Furniture, and Other Transport
Equipment.
During Jul-Dec FY 2024, CPI stood at 28.8 percent against 25.0 percent in the same period last year. On MoM basis, it increased to 0.8 percent in December 2023 compared to an increase of 2.7 percent in the previous month. The major drivers include Food and non-alcoholic beverages, Housing, water, electricity, gas & fuel, Transport and Furnishing & household equipment maintenance.
On the fiscal front, despite encouraging
revenue performance, the expenditure side is under pressure attributed to higher mark up payments. However, government measures to control non-mark up spending helped in improving the primary surplus during the first six months of FY2024. The overall fiscal deficit has been widened by 2.3 percent of GDP, while the primary surplus improved by 1.7 percent of GDP
during Jul-Dec FY2024. A surge of 46
percent was observed in revenue collection, fueled by a 109 percent increase in non-tax collection while a 30 percent rise in tax expectations that interest rates would fall as soon as March.
The core rate also came in higher than expectations, in a clear
vindication of the Fed ineral Reserve’s caution over cutting rates from their 23 year high. Core inflation recorded at 3.9 percent in Dec 2023 down from 5.7 percent in Dec 2022. The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 216,000 jobs in December – unemployment held at 3.7%, signaling a strong labor market. However, the core personal consumption expenditure (PCE) index, Fed’s preferred inflation gauge – rose just 0.1 percent in November to 3.2 percent against expectations of 3.3 percent. On a six-month basis, core PCE was up 1.9 percent, below the Fed’s 12-month target. It is expected that December PCE number will be released before the upcoming Fed’s Monetary Policy Decision scheduled by the
end of this month. The recently published GEP revised US growth forecast upward by 1.4 percentage points from its earlier forecast in June, to 2.5 percent for 2023. This recovery also reflected through growth in WEI.