APCC envisages 3.6pc GDP, 12pc inflation in next fiscal

ISLAMABAD: The Annual Plan Coordination Committee (APCC) has envisaged a GDP growth rate of 3.6 per cent and inflation at 12 per cent for the upcoming budget.

The APCC was told on Friday that the growth prospects hinge upon political stability, exchange rate stability on the back of improvement in the external account and external inflows, macroeconomic stabilisation under the IMF programme, and expected fall in global oil and commodity prices. The APCC envisages a current account deficit at $3.8 billion, equivalent to 0.9pc of GDP indicating that the import restrictions might be lifted to some extent.

The CPI based inflation is projected to bring down and standing at 12pc in the next fiscal year against 23.2pc for the outgoing fiscal year. The inflation is expected to come down mainly because of higher base effect but the prices of over 450 items might not witness much reduction by voiceless consumers.

Agriculture is expected to grow at 2pc in 2024-25, which reflects substantial contraction in the growth momentum. The output of important crops is expected to face contraction of 4.5pc due to severity of dry weather spell and inadequate water availability due to lower-than-normal rainfall, especially in case of Kharif crops. However, availability of certified seeds, fertilisers, machinery, pesticides, and affordable credit may support the envisaged sectoral growth. Other crops and livestock subsectors are envisaged to grow at 4.3pc and 3.8pc, respectively.

The industrial sector is expected to recover in 2023-24 with a targeted growth of 4.4pc on the back of expected LSM growth of 3.5pc. Industrial sector is expected to get boost from improved inputs and energy supplies on the back of anticipated fall in global oil and commodity prices, further easing of import restrictions, higher public sector expenditure and stability in exchange rate and a decline in interest rates. Owing to these factors, prices of construction material are expected to decrease which will support the construction industry to achieve growth target of 5.5pc in 2024-25.

Services sector is also expected to grow at 4.1pc. The envisaged growth of 3.1pc in commodity producing sectors will complement the targeted growth in services sector. Uptick of economic activity in industry, especially manufacturing sectors, will largely translate into better growth in wholesale and retail trade and transport, storage and communications, etc.

Total investment-to-GDP ratio is expected to increase from 13.1pc in 2023-24 to 14.2pc in 2024-25 due to expected economic turnout, improved business environment and political stability. Fixed investment is expected to grow by 27.6pc on nominal basis, whereas as a percentage of GDP, it is expected to increase from 11.4pc in 2023-24 to 12.5pc in 2024-25. National savings are targeted at 13.3pc of GDP for 2024-25.

Fiscal deficit is expected to narrow down on the back of fiscal consolidation measures with a focus on enhancing tax revenue and curtailing non-development expenditures including subsidies. Monetary policy will be aligned with the objectives of inflationary expectations and growth revival. With falling global inflation, domestic average inflation is expected to moderate to 12pc next year.

The current account deficit is expected to widen in 2024-25 with further easing of import restrictions for achieving the growth objectives especially for revival of industrial sector. The scheduled repayments of external debt will put pressures on forex reserves and exchange rate. However, a positive outlook of remittances, exports and external inflows will mitigate these pressures.