Pak GDP growth < 1%

[Dilli]

GDP growth rate may drop below 1pc: official

Pak GDP growth < 1%


GDP growth rate may drop below 1pc: official



Thursday, February 05, 2009
By Khalid Mustafa

ISLAMABAD: Pakistan is feared to experience negative growth this year in all sectors of economy except the agriculture sector, a senior official at Ministry of Finance confided to The News.

Growth in agriculture sector is expected around 4.5 per cent depending on wheat production, if this target was missed the Gross Domestic Product growth rate would be even less than one percent, he said.

Pakistan experienced negative growth in 1952 and if the agriculture sector does not perform up to expectations, then once again the country would be exposed to negative growth of 0.3 per cent.

In the last fiscal year, the agriculture growth was 1.5 per cent and now the country is expecting 4 to 4.5 per cent growth, which is to be the only factor that would take the GDP growth into positive zone.

“We are expecting negative growth by the end of the ongoing fiscal in all sectors of economy except agriculture. The massive negative growth is to hit Large Scale Manufacturing (LSM) and Construction,” the official said keeping in view the preliminary estimates worked out with regard to the expected GDP growth by the end of ongoing fiscal.

“Electricity & and gas distribution, Transport And Communication, Wholesale and Retail Trade, Finance and Banking, Public Administration and Defence and Social and Community Services are also not likely to perform, but the Agriculture sector would be in the positive zone with no major positive impact on overall GDP growth,” he said.

The government is alarmed over the performance in the said sectors of economy and is all set to revise the targets of GDP growth, tax revenue, inflation and exports with International Monetary Fund (IMF) which has extended to Pakistan the 23 months $7.6 billion bailout package under Stand By Arrangement (SBA).

For the ongoing fiscal, the official said, IMF had earlier fixed the target of 3.4 percent GDP growth, 21 percent average inflation, 12 percent growth in export and Rs1,360 billion tax revenue.

Pakistan and IMF would revise the targets during the appraisal process by IMF review mission that is to be held in Dubai during February 14 to 24 period.

Pakistan and IMF would revise downward the target of GDP to about less than one percent, as the global economic outlook has entirely changed from the world scenario during the October-September 2008 period because of the massive decline in oil and commodity prices in the international market.

The official said that Large Scale Manufacturing has 19 per cent weight in GDP growth and it is expected to experience negative 6.5pc growth in this fiscal.

Construction sector with 2.7pc weight on GDP would witness six per cent negative growth against 15pc growth in 2007-08.

Electricity and gas distribution has 1.6pc weight in GDP and its growth is likely to decline 5.5pc from 14.7pc in last fiscal. Mining and Quarrying has 2.5pc in GDP growth and it is likely to experience 3pc growth in this financial year. “This means the overall growth in industrial sector would be in negative zone,” the official said.

Transport and communication sector growth dropped to 1.5pc from 4.4pc in last financial year. Likewise zero growth in wholesale and retail trade is likely to decline to zero per cent from 6.4pc in 2007-08. This particular sector owns the weight of 17 percent in GDP growth of the country.

Finance and banking sector depicting 17pc growth in last fiscal is expected to show negative growth of 4.5pc. The weight of this vital sector stands at 6.5pc in GDP.

The government is expecting status quo in growth of 3.5 percent in ownership of dwellings sector. This sector carries the weight of 2.6 percent in GDP growth. Public Administration and Defence, which has weight of 6.5pc in GDP is likely to witness 5pc growth against 10.9pc in last fiscal year.

_______________________________________________________________

Can anyone explain what happened to Pak economy suddenly after 2007. Pakistan was almost growing at 6-7% and India at 9%. But now India is growing at 7.1% in Global Down-turn, but this was unexpected of Pakistan.

 

[asaad-ul-islam]

Can anyone explain what happened to Pak economy suddenly after 2007. Pakistan was almost growing at 6-7% and India at 9%. But now India is growing at 7.1% in Global Down-turn, but this was unexpected of Pakistan.

democracy happened, and Pakistan went back to the 80's and 90's.

 

[Bull]

democracy happened, and Pakistan went back to the 80's and 90's.

Thats not an explanation at all. How can democracy take away all the growth.

Pakistani growth rate at the boom time was aided by inflation and lesser by real growth. When prices fell, the inflationary effect dissappeared and so did the growth rate.

All those experts who were harping about Pakistani economy tripling in a decade or so will have to eat their words now and look at it shrinking at a faster pace.

 

[Jihad]

Thats not an explanation at all. How can democracy take away all the growth.

Pakistani growth rate at the boom time was aided by inflation and lesser by real growth. When prices fell, the inflationary effect dissappeared and so did the growth rate.

All those experts who were harping about Pakistani economy tripling in a decade or so will have to eat their words now and look at it shrinking at a faster pace.

Wishful thinking, our economy is quite resilient, we're gonna need some time now to recover and get back to our original growth, this WoT and this new government are a pain in the butt.

 

[kenchabhai]

Wishful thinking, our economy is quite resilient, we're gonna need some time now to recover and get back to our original growth, this WoT and this new government are a pain in the butt.

economic aid, 1%growth, currency crash etc is not a hallmark of a resilient economy..

 

[Jihad]

economic aid, 1%growth, currency crash etc is not a hallmark of a resilient economy..

Not in the short term, but i'm pretty confident our GDP growth will not fall below 1%..
One can say, if only Musharraf remained in office, how would our economy be?

 

[kenchabhai]

Not in the short term, but i'm pretty confident our GDP growth will not fall below 1%..
One can say, if only Musharraf remained in office, how would our economy be?

1 or 2% hardly makes a difference for a small economy.
Pak economy is between 100-200bn$. 1% of which is 1 or 2bn$. Hardly significant

Now American economy is 10trillion$, 1% growth means 100bn$.

Musharraf couldn't have done much in these turbulent times IMHO>

 

[Jihad]

1 or 2% hardly makes a difference for a small economy.
Pak economy is between 100-200bn$. 1% of which is 1 or 2bn$. Hardly significant

Now American economy is 10trillion$, 1% growth means 100bn$.

Musharraf couldn't have done much in these turbulent times IMHO>

You call 1 or 2 bn $ hardly significant? You must be very, very rich.
Also, our economy is not really "small", we've done very well and if you compare our economy from '98 till today, we've made immense progress.
Musharraf could've done so much if he only remained in power and took care of all the protests and all the "democratic" and corrupt bastards who have taken over our nation.
It's a matter of a few decades before we rank among the worlds top economies, i'm serious and optimistic, even though we're facing many challenges, we'll recover from this "dip", just wait, (if our leadership doesn't f-up).

 

[kenchabhai]

You call 1 or 2 bn $ hardly significant? You must be very, very rich.

How many Pakistanis are there ? approx 150million right?
now divide 1billion by 150million.

I reckon Pak economy in dollar terms has shrunk due to currency crisis.
And its PPP factor will go down due to high inflation rates.
1&#37; growth rate will be in PKR terms. (Dollar is considered fixed for GDP calculations at times)

Factor in inflation into the equation and things don't look so rosy.

Also, our economy is not really "small", we've done very well and if you compare our economy from '98 till today, we've made immense progress.

I remember reading that poverty, food, electricity shortages in Pakistan have increased ? an improvement in conditions would mean immense progress.

Musharraf could've done so much if he only remained in power and took care of all the protests and all the "democratic" and corrupt bastards who have taken over our nation.

India is equally corrupt as Pakistan and a democracy, India is progressing.

It's a matter of a few decades before we rank among the worlds top economies, i'm serious and optimistic, even though we're facing many challenges, we'll recover from this "dip", just wait, (if our leadership doesn't f-up).

Best of luck

 

[Muradk]

You call 1 or 2 bn $ hardly significant? You must be very, very rich.
Also, our economy is not really "small", we've done very well and if you compare our economy from '98 till today, we've made immense progress.
Musharraf could've done so much if he only remained in power and took care of all the protests and all the "democratic" and corrupt bastards who have taken over our nation.
It's a matter of a few decades before we rank among the worlds top economies, i'm serious and optimistic, even though we're facing many challenges, we'll recover from this "dip", just wait, (if our leadership doesn't f-up).

Jihad: Friend no need to get into a debate they just started this topic for another head to head. let me tell our friends we are very happy with 1%. you guys can take the rest 99%.

 

[AgNoStiC MuSliM]

Can anyone explain what happened to Pak economy suddenly after 2007. Pakistan was almost growing at 6-7&#37; and India at 9%. But now India is growing at 7.1% in Global Down-turn, but this was unexpected of Pakistan.

2007 brought an explosion in terrorism in Pakistan, global food and commodities crises, food shortage in Pakistan, sky rocketing inflation, coupled with structural problems in the economy and political uncertainty with a new democratic government taking charge, with everyone expecting it to collapse, or be overthrown again, either by the military or the extremists - all of that sort of landed simultaneously on Pakistan's plate. Now of course that is all exacerbated by the global economic slowdown.

The structural problems and the food crises alone would probably have been manageable. Things will recover if and when confidence in the civilian government is restored, especially confidence in the continuity of the democratic and political process.

 

[kenchabhai]

Jihad: Friend no need to get into a debate they just started this topic for another head to head.

Sir aren't most threads on India started in the same vein?

let me tell our friends we are very happy with 1%.

I believe sir in current dollar terms, Pak economy could've shrunk.

you guys can take the rest 99%.

Thank you, Your generosity is much appreciated. I wish God give use more and more.

 

[Jihad]

Jihad: Friend no need to get into a debate they just started this topic for another head to head. let me tell our friends we are very happy with 1%. you guys can take the rest 99%.

Honorable Mr. Murad, I agree with you, let them have it.

 

[asaad-ul-islam]

Foreign Reserves Phenomenon: Shaukat Aziz versus PPP

Written By: Afreen Baig

Foreign Reserves &#8211; a significant economic indicator and of vital importance to every expanding economy. Foreign Reserves is the first and basic economic indicator that transmits an air of confidence and trust, amongst the potential foreign & local investors and the nation. Foreign Reserves are held in abundance and accumulated - in order to sustain the confidence of a country&#8217;s capacity to carry out external trade confidently, to balance the momentum between demand & supply of foreign currencies, and also used as an intervention tool by the State Bank. Reserves also bail out the economy in times of financial crisis.

By October 2007, at the end of Prime Minister Shaukat Aziz&#8217;s tenure, Pakistan raised back its Foreign Reserves to a handsome $16.4 billion. His exceptional policies kept our trade deficit controlled at $13 billion, exports boomed to $18 billion, revenue generation increased to become $13 billion and attracted foreign investment of $8.4 billion.

Pakistan recently has seen a drastic drop in its Reserves by 50&#37; and its currency devalued by 40%, which has left ordinary people confused and the usual cynics have started heaping the blame onto the policies of Mr. Shaukat Aziz, without even knowing the basic macro-economic indicators nor understanding the relationship b/w Foreign reserves, Trade deficit and Currency devaluation.

The Trade deficit (Exports minus Imports) is always managed in ratio to Revenue generation, Capital inflows and Reserves. Almost all developing economies face the dread of trade deficit but their abundant foreign reserves gives them the fiscal space to overcome those grievances.
Illustrating in mathematics for ordinary readers, on October 2007, when PM Shaukat Aziz left us:

Exports - $18 billion

Imports - $30.53 billion

Trade deficit - $12.53 billion

Foreign Reserves - $16.4 billion

What is to be seen above is that, Pakistan&#8217;s Foreign Reserves $16.4 bn exceeded the trade deficit $12.53 bn by a comfortable $3.87 billion and with an additional foreign investment of $8.4 billion &#8211; Pakistan&#8217;s currency stayed stable at Rs.61 per dollar.

Currency starts to devalue ONLY when the Trade deficit surpasses the Foreign Reserves. This rare phenomenon occurred in PPP&#8217;s incompetent & dense minded government, which has led to devaluation of the currency by 40%. They failed to protect our Sovereignty - our Foreign Reserves!

In PPP&#8217;s inept government of eight months,

Trade deficit - $20.74 billion

Foreign reserves - $8 billion

Under PPP, the Reserves fell from $14 billion to $8 billion and the trade deficit increased from $12.53 billion to $20.74 billion.

The moment the foreign reserves ($8 bn) fell below the trade deficit ($20.74 bn), the currency starts to devalue. Under Mr. Shaukat Aziz, Rupee stayed stable till October 2007, because our Reserves $16.4 billion EXCEEDED our Trade deficit of $12.53 billion.

In 2007, when international oil prices reached an alarming level of around $90 per barrel, predicting to exceed $140 per barrel, it hurt the Imports bill of many developing countries, by increasing the trade deficit. The experienced Mr. Shaukat Aziz gauged this situation and immediately started monitoring & controlling individual sectors that were importing. He allowed imports only in sectors that were export specific. His efforts resulted in decreasing our Import bill by 6.53% by September 2007 (one month before he left).

Rupee stayed stable throughout Mr. Musharraf&#8217;s supported governments. Trade deficit never exceeded the foreign reserves in the last eight years. The results were as follows &#8211; a stable rupee:

2001-02: Rs. 61
2002-03: Rs. 57.7
2003-04: Rs. 57.92
2004-05: Rs. 59.66
2005-06: Rs. 60.16
2006-07: Rs. 60.5
2007 (Dec): Rs. 61

What did the inefficient PPP do in these last eight months? They failed to monitor each sector of imports to control them individually. Pakistan&#8217;s economy started destabilizing because PPP could not guard our $14 billion reserves. Nor did they utilize any effort to increase the reserves from where Mr. Shaukat Aziz left it at $16.4 billion! The easier way out for them is to beg around the world barefaced or go back to IMF disgracefully.

What did the PPP further do? They increased the import bill by 55% in the months April to June 2008 and again increased it by 52.65% in the months July to September 2008 &#8211; though world oil prices fell from $140 per barrel to $70 per barrel.

Flight of capital takes place ONLY in economies where there is lack of trust and faith! Investors and endowing Public do not trust the government of PPP and are wary of PPP&#8217;s earlier corrupt reputation.

In the first four months of PPP, around $22 billion were withdrawn from the economy and KSE&#8217;s market capitalization fell by $29 billion. The State Bank was forced to place ban on transfer of dollar outside Pakistan.

Foreign reserves get hurt twice in this depletion process. First, when the investors and public pull back their money. Second, when macro-economic indicators witness imbalance and the government is forced to pay their external liabilities through these Reserves. This second stage occurs only when the government loses other means of regular income and is unable to control their imports.

Every country in the world is forced to make Imports. Imports help boost Exports. Even the world exporter China makes an import worth around $954 billion, to further promote their exports. But, Imports should be Export specific &#8211; scrutinized and restrained monthly &#8211; which was being done under the policies implemented by Mr. Shaukat Aziz.

Let&#8217;s analyze the steady India, as an example, with GDP growth of 9%.

Indian Imports - $188 billion (compared to Pakistan&#8217;s imports of $40 billion)

Indian Trade deficit - $63 billion (compared to Pakistan&#8217;s deficit of $20 billion)

The Indian currency is not devaluing because their Foreign Reserves $308 billion exceed their trade deficit of $63 billion.

Had Mr. Shaukat Aziz continued, the Trade deficit would have been kept controlled in accordance with Pakistan&#8217;s Revenue generation, Capital inflows and Foreign Reserves &#8211; which would have kept our rupee stable and economy booming at 7% GDP growth.

This latest IMF tranche of $7.6 billion, pre-arranged for a period of two years, will not help boost an economy whose foreign investment is declining, and where the trade deficit exceeds the total foreign reserves. This economic deception is yet another soothing drug given to us, by our unpopular democratic government of PPP.

If Pakistan wishes to remain free from influence of IMF, there is no better option than to assert our economic sovereignty and accumulate Foreign Reserves, from help of over-seas Pakistani. Additionally, attract foreign direct investment (FDI) and public & private portfolio investment. Regrettably, PPP lacks the credibility and the reliability to attract back that trust and confidence!

Afreen Baig is an independent analyst majoring in International Relations and Economics. She can be reached at afreenbaig@gmail.com

Foreign Reserves Phenomenon: Shaukat Aziz versus PPP Our leader - Musharraf

 

[Cheetah786]

GDP growth rate may drop below 1pc: official

Pak GDP growth < 1%


GDP growth rate may drop below 1pc: official



Thursday, February 05, 2009
By Khalid Mustafa

ISLAMABAD: Pakistan is feared to experience negative growth this year in all sectors of economy except the agriculture sector, a senior official at Ministry of Finance confided to The News.

Growth in agriculture sector is expected around 4.5 per cent depending on wheat production, if this target was missed the Gross Domestic Product growth rate would be even less than one percent, he said.

Pakistan experienced negative growth in 1952 and if the agriculture sector does not perform up to expectations, then once again the country would be exposed to negative growth of 0.3 per cent.

In the last fiscal year, the agriculture growth was 1.5 per cent and now the country is expecting 4 to 4.5 per cent growth, which is to be the only factor that would take the GDP growth into positive zone.

“We are expecting negative growth by the end of the ongoing fiscal in all sectors of economy except agriculture. The massive negative growth is to hit Large Scale Manufacturing (LSM) and Construction,” the official said keeping in view the preliminary estimates worked out with regard to the expected GDP growth by the end of ongoing fiscal.

“Electricity & and gas distribution, Transport And Communication, Wholesale and Retail Trade, Finance and Banking, Public Administration and Defence and Social and Community Services are also not likely to perform, but the Agriculture sector would be in the positive zone with no major positive impact on overall GDP growth,” he said.

The government is alarmed over the performance in the said sectors of economy and is all set to revise the targets of GDP growth, tax revenue, inflation and exports with International Monetary Fund (IMF) which has extended to Pakistan the 23 months $7.6 billion bailout package under Stand By Arrangement (SBA).

For the ongoing fiscal, the official said, IMF had earlier fixed the target of 3.4 percent GDP growth, 21 percent average inflation, 12 percent growth in export and Rs1,360 billion tax revenue.

Pakistan and IMF would revise the targets during the appraisal process by IMF review mission that is to be held in Dubai during February 14 to 24 period.

Pakistan and IMF would revise downward the target of GDP to about less than one percent, as the global economic outlook has entirely changed from the world scenario during the October-September 2008 period because of the massive decline in oil and commodity prices in the international market.

The official said that Large Scale Manufacturing has 19 per cent weight in GDP growth and it is expected to experience negative 6.5pc growth in this fiscal.

Construction sector with 2.7pc weight on GDP would witness six per cent negative growth against 15pc growth in 2007-08.

Electricity and gas distribution has 1.6pc weight in GDP and its growth is likely to decline 5.5pc from 14.7pc in last fiscal. Mining and Quarrying has 2.5pc in GDP growth and it is likely to experience 3pc growth in this financial year. “This means the overall growth in industrial sector would be in negative zone,” the official said.

Transport and communication sector growth dropped to 1.5pc from 4.4pc in last financial year. Likewise zero growth in wholesale and retail trade is likely to decline to zero per cent from 6.4pc in 2007-08. This particular sector owns the weight of 17 percent in GDP growth of the country.

Finance and banking sector depicting 17pc growth in last fiscal is expected to show negative growth of 4.5pc. The weight of this vital sector stands at 6.5pc in GDP.

The government is expecting status quo in growth of 3.5 percent in ownership of dwellings sector. This sector carries the weight of 2.6 percent in GDP growth. Public Administration and Defence, which has weight of 6.5pc in GDP is likely to witness 5pc growth against 10.9pc in last fiscal year.

_______________________________________________________________

Can anyone explain what happened to Pak economy suddenly after 2007. Pakistan was almost growing at 6-7% and India at 9%. But now India is growing at 7.1% in Global Down-turn, but this was unexpected of Pakistan.

Simply put it Most governments in Pakistan our bad luck if U wanna call it will immediately stop previous government policies as soon as they come in power every thing started by mushys governemnt was starting to bring fruits but in dying days of that government to score political points they started back tracking and after democrazy came in full stop on every thing all togather.