state bank announces no change in interest rate

Business confidence and the outlook for growth have improved Confidence improved after easing of lockdowns, as well as the timely stimulus provided by the Government and SBP

Forecast for inflation risen slightly, primarily due to recent supply side shocks to food prices
Average inflation is now expected to range 7% to 9% during FY21
Series of targeted measures undertaken by SBP since the Covid-19 outbreak have injected significant liquidity
These monetary measures have injected an estimated stimulus of Rs. 1.58 trillion, or about 3.8 percent of GDP
Government has undertaken a number of significant measures to support economic activity
In reaching its decision, the MPC considered key trends and prospects in the real, external and fiscal sectors, and the resulting outlook for monetary conditions and inflation
Following a deep contraction between March and June LSM returned to expansion
In July LSM grows by
High-frequency demand indicators including auto sales, cement dispatches, POL sales, and electricity consumption also reflect an encouraging pick-up in economic activity
Nonetheless, the economic recovery remains uneven across industries, with the hospitality and certain services sectors especially lagging
Going forward, Growth is projected to recover to slightly above 2 percent in FY21.

IN FY20 GDP falls to -0.4 percent
Recovery is expected to be driven mainly by manufacturing-related activities and construction On the downside, risks include a potential second wave of Covid-19 domestic infections, A possible sharp increase in infections in the winter months expected in Pakistan’s major export markets in Europe and the US on the upside, a faster global recovery could lift exports higher.

Despite a challenging environment, the external sector has remained resilient since the Coronavirus outbreak
Low global oil prices and subdued domestic demand helped to reduce the current account deficit
Gradual recovery is expected in exports and remittances have performed strongly on the back of orderly exchange rate
Conditions as well as supportive policy steps taken by the Government and SBP under the Pakistan Remittance Initiative
Looking ahead, the current account deficit is expected to remain bounded at around 2 percent of GDP
This, together with expected private and official flows, should continue to keep Pakistan’s external position stable in FY21
Despite severe pressures from the Coronavirus and contrary to expectations, the fiscal deficit for FY20 ended lower than in FY19
Increase in public debt was contained to around 1 percent of GDP
During the first two months of FY21, in line with the gradual pick-up in economic activity, tax revenues returned to positive growth, averaging around 1.2 percent
Notwithstanding an uptick in headline inflation during June and July, core inflation has been relatively stable and demand-side risks to inflation remain well-contained.
Like growth, the inflation outlook is also subject to certain risks.

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