PIDE survey sees high inflation, unemployment
August 18, 2012 by A Reporter
Illustration of price hike — File Photo
ISLAMABAD: Pakistanis expect high inflation and unemployment in the coming months and feel the prevailing economic policies are not sufficient for economic growth, a survey’s findings of inflation expectations conducted by Pakistan Institute of Development Economics (PIDE) revealed on Friday.
Persistent inflation, policy credibility, budget and the law and order situation are the main factors behind the public’s expectations about high inflation, according to the respondents of the survey.
Inflation is expected at 15 per cent in August, according to the PIDE inflation expectations survey of June 2012, and respondents are forecast inflation will remain at 13 per cent for the first six months of 2012-13.
The vast majority of respondents are of the view that inflation is likely to overshoot its target of 9.5 per cent for 2012-13 fiscal year.
Annual average inflation for 2011-12 was at 11.01 per cent.
Unrestrained government borrowings from the central bank, severe energy crisis and low policy credibility triggered the rise in the pace of inflation for the last several months, according to the survey which was taken in June.
Inflation in Pakistan is largely driven by bad governance, rising food and oil prices and the widening of the budget deficit.
According to the survey, monetary policy is not the only tool to curtail inflation, but needed coordination with the fiscal policy to retain inflation at the target of 9.5 per cent.
The survey highlights that 38.1 per cent respondent think that bad governance is the major cause of high inflation. Other factors are food prices 23.8 per cent, oil prices 22.8 and fiscal deficit 19.5 per cent, followed by money supply, utility prices and international inflation.
According to 28.2 per cent respondents, current inflation is cost push whereas 14.1 per cent of the respondents think that it is demand pull and 7.1 per cent consider it structural in nature.
In response to a question about which class of the society is most hurt when there is an increase in inflation, the majority, 57.1 per cent, said it was the middle class.
The rupee has continuously been under pressure for the previous months and according to the results of the survey 59.6 per cent of the respondents expect the rupee will depreciate further in the next six months while 31 per cent expect it to appreciate.
The results also indicated that respondents are pessimistic about economic growth and 44 per cent believe it will remain the same in the next six months, 33.3 per cent expect a lower growth rate while 22.6 per cent are expecting an increase in economic growth.
