6% inflation favorable for economic growth: SBP’s study

Pakistan will continue to have favorable economic growth if annual inflation remains around 6%, an SBP study, titled ‘Threshold Inflation in Pakistan’ read, warning, however, of negative outlook in case of uptick from the forecast. The govt. has projected growth and consumer price inflation at 6% for FY18, above from the SBP’s projections of 5-6% for GDP growth and 4.5-5.5% for inflation. Inflation is however, expected to rise in the coming months in the wake of the rupee depreciation and increasing international oil prices. As per the study, an average 1% increase in inflation is associated with 0.74% increase in real GDP growth when inflation is below threshold level and 0.53% decrease in real GDP growth, when inflation is above threshold level.

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