ISLAMABAD - The government is confident to achieve the economic growth between 2.5 to 3 per cent during the ongoing fiscal year 2008-09, despite unfavourable global economic scenario and prevailing security situation coupled with negative growth in large-scale manufacturing (LSM) sector. A report on 'Review of Economic Situation during July-March 2008-09, made public by the Ministry of Finance here on Monday says, The negative growth in LSM growth and falling credit to the private sector are indications of falling real economic activity, however, still better growth prospects in the agriculture and the services sector will keep hope of real GDP growth at the targeted level between 2.5 to 3 per cent in 2008-09. The domestic socio political upheavals and intensification of global financial crisis added to these multifaceted problems. After endorsement of Economic Stabilization programme by the IMF, the economy got confidence back, the report stated. Now by the end of April 2009, early signs of improvement in economic variables such as inflation stabilization, foreign exchange reserves build-up, import compression, and net zero government borrowings from the SBP are evident. It highlights, The economy is geared up and the fiscal deficit target of 4.3 per cent of GDP and the current account deficit of 5.9 per cent of the GDP is now within achievable range. It alarmed, however, recent global financial crisis and extremely vulnerable security environment added risks to the economy. The trade data for the month of February and March 2009 hints at imminent risks to the external sector. The trade data manifest the challenges being faced by Pakistan economy owing to global economic meltdown. The two extremes in the remittances data like massive growth in remittance inflow from UAE and negative growth in US again need some assessment because if somebody has lost a job in UAE, he has to return with retained savings immediately while a person in similar situation in US can wait for the better tomorrow by consuming part of his retained savings. Notwithstanding, persistent rise in month-on-month inflation in the months of February and March, and pressure from rising energy, wheat and sugar prices, there is enough evidence that average CPI inflation for the fiscal year will be around 20 per cent with end-year inflation of around 11 per cent. The most optimistic estimate for the next year inflation will be around 6 per cent. The report pointed out, The pressure on monetary, fiscal and exchange rate policy will be mitigated by lowering financing needs emanating from lower fiscal and current account deficits as envisaged in the Stabilization Programme. Elimination of subsidies, partial transfer of oil payments to the foreign exchange market, and fall in the international oil prices will provide great help on this count. The downside risk to the stabilization programme may come from slippages on account of FBR revenue collection which is more than compensated by even better rise in petroleum development levy (PDL) and slowdown in exports neutralizing to some extent steep fall in import growth. Pakistans macroeconomic environment is affected by intensification of war on terror and deepening of the global financial crisis, which penetrated into domestic economy through the route of substantial decline in Pakistans exports and a visible slowdown in foreign direct inflows. Although contraction in export receipts is more than compensated by massive import compression emanating from global crash of crude oil prices, the external sector vulnerabilities need a review. The global economic slowdown is making inroads into real economy through contraction in demand in the export sector as well as shrinkage of external inflows. Pakistans economy continues to remain exposed to the vagaries of international developments as well as internal security environment. The intensity of the global financial crisis has further added to Pakistans predicament. Despite support from the IMF and other bilateral and multilateral donors, Pakistans external account remains exposed to a host of uncertainties. The outlook for economic growth remained pessimistic as import demand shrivelled, tax collection declined, and inflows of foreign investment and privatisation dampened. The Economic Stabilization Programme has already ensured adjustment in petroleum prices to reduce the burden on the budget; significant cuts in expenditures to reduce budgetary deficit and notwithstanding slight downward adjustment in policy rate general stance of monetary policy remained tight. These measures are paying dividend under precarious global and domestic conditions. Recent trends in most macroeconomic variables suggest that the disciplined implementation of the macroeconomic stabilization programme has started paying some dividends. The demand compression is also manifested from improvement in the cumulative July-March 2008-09 trade deficit, which is the first reduction in the last six years. The narrowing of trade deficit and robust remittances has caused a reduction of almost $2 billion in the current account deficit and even for the month of February 2009, we have witnessed first surplus in monthly current account surplus since June 2007. The improvement allowed for a build-up of the countrys foreign exchange reserves beyond $11 billion.