KARACHI: Pakistan’s economy has witnessed a modest improvement in fiscal year 2012, as real GDP grew by 3.7 per cent during the year compared with 3.0 percent in fiscal year 2011.

According to the State Bank’s Annual Report on the “State of the Economy for the year 2011-12” released here Wednesday, the growth was more broad-based compared to FY11 as it was evenly distributed across agriculture, industry and the services sector.

The demand side was more insightful as the growth in FY12 was primarily driven by private consumption, it said, adding that strong worker remittances, a vibrant informal economy and higher fiscal spending, supported consumption growth during the year.

The SBP report said that food prices have remained relatively stable during FY12, which helped bring down overall inflation to 11.1 percent better than the 12.0 percent projected earlier.

“It was this easing that allowed the central bank to reduce the policy rate by 200 basis points during the year; this was done to partially revive private sector borrowing, encourage banks to improve their intermediation between private savers and borrowers,” the report added.

According to the report, the external front was positive as remittances posted a year of strong growth, which not helped narrow the current account deficit, and also contributed to economic activity.

“In overall terms, the external sector has been less worrying than anticipated at the beginning of the year; however, as financial inflows dried up, the burden of financing the current account deficit and external debt, has fallen on the country’s foreign exchange reserves,” the report added.

While services continued to support the economy, commodity producing sectors (agriculture and industry) posted an improvement over FY11, the report noted, adding that the growth in agriculture came from livestock and kharif crops, but minor crops witnessed a decline due to the floods in the first quarter of FY12.