Islamabad, June 23 (IANS) Pakistan's economic growth of 3.7 percent in the 2011-12 fiscal year was encouraging given the adverse effects of energy shortage, oil price rise and damage to the cotton crops during that period, the central bank has said.

The growth was higher than 3.0 percent realized in the previous year, but less than the 4.2 percent target, the State Bank said in its third quarterly report on the state of the economy Friday. Nevertheless, this performance is notable, it said.

This growth has also been "more broad-based with a larger contribution from commodity producing sectors compared to the previous fiscal, Geo TV quoted the report as saying.

As in the past, growth has been driven by domestic consumption, which was partially offset by a decline in domestic investment and external demand, the report said.

It observed although Pakistan's economy has shown some recovery in terms of GDP growth, key macro indicators still remain weak.

Persistent inflation and pressure on fiscal and current accounts, remain key challenges for economy.

While low investment and energy shortages have direct growth implications, persistently high fiscal deficit remains a major risk to macro-economy.