Economy growth: Pakistan set to miss target for second year

[ziaulislam]

ISLAMABAD: The economy is projected to have grown at a rate of 4.2% during the fiscal year 2015, the second year in a row that it has missed the Nawaz administration’s target.

The growth rate was announced on Monday by the Pakistan Bureau of Statistics and is the first provisional reading of the growth in Gross Domestic Product (GDP) for the fiscal year that ends June 30. The number is subject to later revision, and is frequently revised significantly from its original projection.

The 4.2% growth rate was only marginally better than the 4.0% achieved last year, and well short of the government’s target of 5.1%. The International Monetary Fund, however, was projecting a 4.1% growth rate. While slower than the 7-8% that most macroeconomists believe is necessary to sustainably absorb new entrants into the workforce, it is nonetheless regarded as far more stable than the anemic 2.62% average growth rate during the preceding Zardari administration.

More than two-thirds of the growth – 68% to be precise – came from the services sector, the largest part of the economy and the one the government typically tends to ignore the most. Growth in agriculture and industry, where the government has the most intervention, grew slower.

Speaking to The Express Tribune on Sunday, Finance Minister Ishaq Dar acknowledged that the government needed to implement more growth-oriented reforms and that the Nawaz Administration was doing all it could to spur economic growth. All but five of the government’s targets were missed. The official GDP estimates for fiscal 2015 will be announced by the finance minister on June 4, with the release of the 2015 Economic Survey of Pakistan.

Out of 23 key growth indicators, the five hit the government’s targeted growth rates while 18 indicators, primarily in agriculture and industrial sectors, remained below expectations. And the provisional numbers may be telling an inflated story. As in previous years, the National Accounts Committee of the PBS took the budgeted numbers for development spending, whereas actual spending has lagged that number dramatically.

The budgetary estimates helped push government consumption and public investment up, which in turn pushed the overall growth rate to 4.2%.

Agriculture

The agriculture sector grew the slowest, increasing in size by only 2.9% as opposed to the 3.3% projected by the government. Agriculture accounts for 21.6% of GDP but only accounted for 14% of this growth. The anemic progress in agriculture is in line with the ruling Pakistan Muslim League Nawaz’s historical record of ignoring the sector that employs close to 37% of the labour force. During the PML-N’s two stints in office in the 1990s, agriculture grew by an average of 2.52% per year, as opposed to overall economic growth during that time averaging 4.06% per year.

Production of both major and minor crops, livestock and forestry remained below the government’s projected targets. Production of wheat and sugarcane, the two major crops where the government has the most intervention in the form of procurement programmes and support prices, was actually down compared to last year. So was production of maize. Only cotton ginning and fisheries grew by more than the government’s expectations.

Industries

The biggest miss from the government’s targets came in the industrial sector, which grew by 3.6% compared to the government’s 6.8% target, suggesting that a lack of access to credit, hampered because of heavy government borrowing crowding out the private sector, was causing a slowdown. The energy crisis, led by the state-owned portions of the energy supply chain, is also a factor that continues to hamstring industrial growth.

Every subsector – small-scale manufacturing, slaughtering, electricity generation and distribution, mining and quarrying, large scale manufacturing and construction – missed the government’s projections.

Services

The services sector, which accounts for more than half the economy, grew by 4.95%, narrowly missing the government’s 5.2% projected growth rate. Aided by heavy government borrowing and an increase in the money supply, the financial services sector and government services beat expectations, but every other subsector – transportation, communications, wholesale and retail – all missed targeted growth rates.

 

[ziaulislam]

Despite positive sentiments and macroeconomic stability govt couldnt achieve growth target.

so why did the govt missed the growth i think two things went wrong.

1. constrained power sector due to increases losses, therefore circular debt and lower production, affecting even the industrial sector
2. lack of achieving taxation target resulting in slashing development funds by over 50% causing decrease growth due to low spending, as govt was suppose to keep the deficit down due to IMF
commitment

 

[M.SAAD]

ANY growth is positive growth for Pakistan at this point, considering we're in the middle of a Horrific war on Terrorism which has taken a complete toll on Pakistan..


Seriously, we can't expect a steady growth of the country at this point..

 

[definitelynotIndian]

ANY growth is positive growth for Pakistan at this point, considering we're in the middle of a Horrific war on Terrorism which has taken a complete toll on Pakistan..


Seriously, we can't except a steady growth of the country at this point..

except?

 

[M.SAAD]

except?

thanks, corrected.

 

[The Great One (Mod ver)]

Hey wait a minute.
Report card: Pakistan may miss growth target for fifth year in a row

Since you people missed growth targets for 5 years till 2013, and then now in 2015 it 2 years till this year, then didn't you miss growth targets for 7 years running?

 

[pkuser2k12]

Pakistan has missed all economic goals set for the year

Babar Awan rightly said that only the money lenders like IMF and Asian Development bank are saying that Pakistans eonomy is moving in the right direction whre as all indicators shows otherwise
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[WAR-rior]

But still Pakistani GDP is increasing steadly. How? I remember Pakistan GDP was some 160 Bn in 2008-2010 and today its 310 Bn. How come? Can any Pakistani explain this phenomenon? Or is it just the nominal GDP growth due to huge inflation along with mediocre real growth which shot up the nominal growth to double digits ? I mean what else?

 

[Cheetah786]

Insanity: doing the same thing over and over again and expecting different results.
=
Pakistani: electing the same over and over again and expecting a different results.

 

[I FLY HIGH]

power cuts is the major issue , if we could give sufficient and un interrupted power to production houses along with gas , we could surely touch the target , while FDI is also low which is also a cause of low gdp growth . I believe with the huge chineese investment pouring in , it will surely increase the gdp growth to more that 5 percent in the next year .

 

[The Great One (Mod ver)]

power cuts is the major issue , if we could give sufficient and un interrupted power to production houses along with gas , we could surely touch the target , while FDI is also low which is also a cause of low gdp growth . I believe with the huge chineese investment pouring in , it will surely increase the gdp growth to more that 5 percent in the next year .

Do you have any timeline of the projects that the Chinese are going to execute. I mean which milestone to be achieved by which date/month/year?

 

[Kambojaric]

Despite positive sentiments and macroeconomic stability govt couldnt achieve growth target.

so why did the govt missed the growth i think two things went wrong.

1. constrained power sector due to increases losses, therefore circular debt and lower production, affecting even the industrial sector
2. lack of achieving taxation target resulting in slashing development funds by over 50% causing decrease growth due to low spending, as govt was suppose to keep the deficit down due to IMF
commitment

Agreed especially with point 2. The government has performed abysmally as far as tax collection is concerned (10-month performance: FBR falls short of tax collection target by Rs100b - The Express Tribune despite pressure from the IMF. Still things are better now then they were under the disaster that was PPP.

 

[Paksanity]

But still Pakistani GDP is increasing steadly. How? I remember Pakistan GDP was some 160 Bn in 2008-2010 and today its 310 Bn. How come? Can any Pakistani explain this phenomenon? Or is it just the nominal GDP growth due to huge inflation along with mediocre real growth which shot up the nominal growth to double digits ? I mean what else?

Pakistan has never stopped growing. Since 1947 there is only a single year where Pak economy went into recession (1958 or 1959 perhaps). There are few reasons people often overlook but they keep economy growth going.

1. Undocumented economy which makes for two third of our economy. No figures come out of it but it is always growing.

2. Undocumented inflow of remittances. Not good for government and documented economy but foreign cash flows in lot more than it shows. Population invests this cash into economy again mostly undocumented.

3. Natural resource to population ratio. From fertile lands to minerals, farm cattles to fisheries, nature has blessed Pakistan with too many resources and compared to its size population is not as dense as some other countries (India and Bangladesh for example). With correct policies, Pakistan can be turned around in half the time it will take for India. I call it our economic agility because our economy has to pull less weight.

4. Large number of expats vs total population resulting in good remittances. In numbers we are fraction of India but when you factor in population of both countries picture becomes clearer.

Pakistan has been and still is to some extent land of abundance. Despite wrong decisions Pakistan remains a growing economy though much less what could have been.

 

[WAR-rior]

Pakistan has never stopped growing. Since 1947 there is only a single year where Pak economy went into recession (1958 or 1959 perhaps). There are few reasons people often overlook but they keep economy growth going.

1. Undocumented economy which makes for two third of our economy. No figures come out of it but it is always growing.

2. Undocumented inflow of remittances. Not good for government and documented economy but foreign cash flows in lot more than it shows. Population invests this cash into economy again mostly undocumented.

3. Natural resource to population ratio. From fertile lands to minerals, farm cattles to fisheries, nature has blessed Pakistan with too many resources and compared to its size population is not as dense as some other countries (India and Bangladesh for example). With correct policies, Pakistan can be turned around in half the time it will take for India. I call it our economic agility because our economy has to pull less weight.

4. Large number of expats vs total population resulting in good remittances. In numbers we are fraction of India but when you factor in population of both countries picture becomes clearer.

Pakistan has been and still is to some extent land of abundance. Despite wrong decisions Pakistan remains a growing economy though much less what could have been.

Arre pappu. Sorry if u misunderstood me. I meant how can only in 6-7 years ur GDP nominal increased twice only with 3.5-4% real growth.

how do u explain that? Thats my query.

 

[I FLY HIGH]

Do you have any timeline of the projects that the Chinese are going to execute. I mean which milestone to be achieved by which date/month/year?

some of the projects have been earthbreaked , some of those will be earth breaked during later part of this year . Timeline of completion of different projects is different, like sahiwal 1320 mwt and port Qasim 1320 mwatts will be ready by end 2017, nuclear projects 2200 mwts in Karachi will be ready by 2019, Thar coal mining will be ready by 2017 , similarly every project can have different timelines while in short 10,400 mwtts power will be ready by 2018. CPEC will be done in phases and will take a little longer to complete it to full map.