SBP Warns Pakistan May Face “Stagflation” Risk Amid Slowing Growth and High Inflation
Islamabad: The State Bank of Pakistan (SBP) has warned that the national economy could be moving toward a potential phase of “stagflation,” where economic growth slows while inflation remains persistently high.
In its latest Monetary Policy Committee statement, the central bank cautioned that this situation could lead to weaker GDP growth alongside sustained price pressures, potentially increasing poverty and unemployment in the country.
Stagflation typically refers to a difficult economic condition in which inflation remains elevated even as economic activity slows, creating challenges for both policymakers and households.
The SBP noted that during the first half of the current fiscal year (July to December), Pakistan’s real GDP growth stood at 3.8%, reflecting moderate expansion. However, it warned that ongoing economic pressures could affect future growth momentum.
Economists say the warning highlights the delicate balance faced by policymakers as they try to control inflation while also supporting economic recovery.
