Pakistan says economy to grow close to 7 pct

SINGAPORE, Sept 14 (Reuters) Pakistan's central bank governor said on Thursday the economy would expand by close to 7 percent this fiscal year and that the regulator's tight monetary policy stance had managed demand without stifling growth.

Shamshad Akhtar, governor for the State Bank of Pakistan, told Reuters in an interview that a buoyant services sector, especially financial services, a robust retail sector and strong investment would drive growth this year.

''We are definitely upbeat on Pakistan's economic prospects,'' Akhtar said. ''We are likely to achieve close to 7 percent growth in 2007,'' roughly in line with a previous central bank forecast.

The economy grew by 6.6 percent in the last fiscal year ended in June.

Akhtar said the main risk to growth was the high price of oil, but added that she was happy with the recent relief felt from softer crude prices. She said she was confident that a possible slowdown in the U.S. economy would have only a limited impact on Pakistan's economy.

She added that the central bank's tight monetary policy was working to slow private credit growth and said its inflation target of 6.5 percent was attainable.

In the year ended June 2006, inflation in Pakistan fell to 7.92 percent from 9.28 percent a year earlier.

Core inflation was on a downward trend, she said.

Pakistan's central bank has been on an aggressive monetary tightening path to fight inflation and to keep private sector credit growth in check.

REUTERS CS KP1322