THE recent macroeconomic trends confirm Prime Minister Imran Khan’s words that a broad-based recovery appears to be underway. The evidence of this turnaround can be seen in the recent rebound in manufacturing as indicated by record cement sales, increased demand for cars, motorbikes and white goods, revival of the construction industry, etc. In short, the resurgence of domestic consumption is pushing the current growth momentum. It is a positive sign that the ongoing spurt in consumption is not driven by imports — at least not at the moment. That is why we have seen large-scale manufacturing revive and the current account post a surplus during the first quarter of the financial year. Other economic indicators such as fiscal deficit and exports — barring food inflation — are also moving in the right direction, according to finance ministry data. The stock market has outperformed other Asian markets and the rupee has strengthened of late. Thus, it can safely be assumed that the country is crawling out of the Covid-induced economic sluggishness that dominated the last quarter of the previous fiscal, even if it is not racing towards growth.
Does this mean that the economy is back on the right track as the prime minister claimed at the launch of the Naya Pakistan Certificates on Thursday? Not really. The resurgence of another ‘economic boom’ doesn’t necessarily mean that the country is once again treading the path of sustainable growth. Challenges remain. For starters, coronavirus infections are again rising, and rapidly, threatening to reverse economic gains. More important, the present economic rebound largely owes to the extensive fiscal stimulus and generous monetary support given by the State Bank to businesses in order to protect them from the adverse impact of the health crisis. Any premature withdrawal of these measures would slow down or delay recovery. More worrying is the fact that the structural issues responsible for dragging down the economy in the past remain unaddressed. For example, little has been done to fix state-owned enterprises and the collapsing energy sector, which have been a major drag on growth. Similarly, tax reforms have been postponed and the issues facing the agriculture sector remain unresolved. With the revival of the IMF programme pushed back further, work on economic and governance reforms will remain suspended for the moment. Only the naïve will expect the current turnaround to last long without implementation of politically tough reforms. https://www.dawn.com/news/1590272/economic-trends
Economic trends: Editorial in Dawn, November 14th, 2020
THE recent macroeconomic trends confirm Prime Minister Imran Khan’s words that a broad-based recovery appears to be underway. The evidence of this turnaround can be seen in the recent rebound in manufacturing as indicated by record cement sales, increased demand for cars, motorbikes and white goods, revival of the construction industry, etc. In short, the resurgence of domestic consumption is pushing the current growth momentum. It is a positive sign that the ongoing spurt in consumption is not driven by imports — at least not at the moment. That is why we have seen large-scale manufacturing revive and the current account post a surplus during the first quarter of the financial year. Other economic indicators such as fiscal deficit and exports — barring food inflation — are also moving in the right direction, according to finance ministry data. The stock market has outperformed other Asian markets and the rupee has strengthened of late. Thus, it can safely be assumed that the country is crawling out of the Covid-induced economic sluggishness that dominated the last quarter of the previous fiscal, even if it is not racing towards growth.
Does this mean that the economy is back on the right track as the prime minister claimed at the launch of the Naya Pakistan Certificates on Thursday? Not really. The resurgence of another ‘economic boom’ doesn’t necessarily mean that the country is once again treading the path of sustainable growth. Challenges remain. For starters, coronavirus infections are again rising, and rapidly, threatening to reverse economic gains. More important, the present economic rebound largely owes to the extensive fiscal stimulus and generous monetary support given by the State Bank to businesses in order to protect them from the adverse impact of the health crisis. Any premature withdrawal of these measures would slow down or delay recovery. More worrying is the fact that the structural issues responsible for dragging down the economy in the past remain unaddressed. For example, little has been done to fix state-owned enterprises and the collapsing energy sector, which have been a major drag on growth. Similarly, tax reforms have been postponed and the issues facing the agriculture sector remain unresolved. With the revival of the IMF programme pushed back further, work on economic and governance reforms will remain suspended for the moment. Only the naïve will expect the current turnaround to last long without implementation of politically tough reforms. https://www.dawn.com/news/1590272/economic-trends
Published in Pak Media comment and Pakistan