WHAT OTHERS SAY

ECONOMIC DIRECTION?

The latest round of interest rate hikes administered by the State Bank speaks of ominous trends beneath the surface. This is the second large hike since the latest round of monetary tightening began earlier this year, coming in at 1pc. In announcing it, the State Bank pointed to the growth of underlying Inlationary pressures As well As THE iscal AND Current Account DEICITS As key EMERGING CHALLENGES that HAVE yet to BE TACKLED in a convincing way. Overall, economic activity is expected to decelerate this iscal year, THE monetary policy statement SAID, putting THE Growth forecast at 5pc. Only a few days ago, the Asian Development Bank forecast 4.8pc growth, whereas the target was 6.2pc. Clearly, a rapid deceleration in growth is coming our way. The State Bank’s action shows that the underlying challenges that the economy faces are far from receding; in fact, they are growing. Between July and September, this is the second downward revision of the State Bank’s forecast for economic growth, and THE second rise In THE Forecast For Core Inlation. Not only that, THE Current Account DEICIT Continued to rise In THE irst two months of THE iscal year, despite the strong growth in workers’ remittances and exports. In large measure, THE DIFICULTIES on THE External Account Front ARE THE product of rising oil prices, But Equally signiicantly, they ARE THE result of pressing ahead with a type of growth that the economy was unable to afford. The net result Is A DECLINE In FOREIGN reserves By $800m Compared to THE irst two months of THE last iscal year. Dawn