Pakistan's economic indicators are worsening and remittances and loans would not support economy in the long term. This was stated by professor Dr Norbert Walter, the chief economist for Deutsche Bank group and CEO of Deutsche Bank research speaking on the "2008: Developed Countries Downswing- Emerging Markets Inflation Requires Restrictive Policies" at a local hotel here on Monday.
The speaker said that inflation is not the only problem in Pakistan and for the last fiscal it is continuously on rise across the world, while particularly in Pakistan it has surged due to the reduction in subsidies. However that cut in subsidies, he said is a positive measure taken by the government.
Walter said that the economic indicators of Pakistan's economy during the last fiscal year are not positive and showed a worsening trend, while current account deficit and fiscal deficit are at a higher level with limited foreign reserves. He also believed that remittances and loans would provide only short-term support to the economy, as these are insufficient to reduce the current account and fiscal deficit, he said.
"Pakistan should attract the high portfolio investment and boost the exports for the long term support to the economy, that also help to reduce the current account deficit," he added. He said that during 2008 inflation rates remained above the target across the world and most of countries' inflation stood at double digit.
"The inflation in Asia also remains on high side with China at some 7.11 percent, India 11.9 percent, Vietnam 26.8 percent, Thailand 8.9 percent, Indonesia 11.1 percent, Malaysia 7.7 percent and Philippine having 11.4 percent inflation," he informed.
While on the other side many Asian central banks rates are below the inflation rate, which is further creating problems, he added. He said that sharp price increases on energy and foodstuffs are linked with the major advances in development occurring in many emerging markets, which are the result of the increased use of household appliances.
Moreover, a lot more energy is also being consumed because of the rapid pace of infrastructure expansion. Professor Walter said that overall energy prices including electricity and gas are unlikely to come down in the fiscal year 2009 globally and will become more expensive in the future, while during the half of next decade the oil prices would surge to new peak of 200 dollar per barrel.
"Some decline in the oil price in the near future is expected, however despite some decline in oil prices, the prices of metal and commodities prices would not come down in view of the tremendous demand," he added.
Speaking about the sub-prime crisis he said that it has triggered the sharp slowdown in US economy, while the emerging and developing countries would also be hurt by the US financial market turmoil.
The sub-prime crisis has hit the housing industry declining the demand and prices of houses and real-estate sector causing recessions in several countries, he said. He said that current financial turmoil has also hit Asia and stocks and bonds markets are likely to suffer. However, a marked rise in interest rates in emerging markets the economic downturn may well intensify during current fiscal year.