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Pakistan Economic Growth rate Watch Thread

Every country that has succeeded in increasing its GDP has worked on lowering its inflation rate beforehand..Pakistan should work on that if it is not already doing it..
 
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Bhai, doesn't this target of 5.7% seem too optimistic given what was officially achieved this year (4.7%) and some analysts saying the actual growth was actually around 3.1% region?

Is Pakistan looking to revise its base year/methodology soon btw? I remember you were saying this in previous threads, but I havent come across any updates.

Pakistan ccould had achieved 5.2% growth this year if the agri sector had performed like last year(not the target).

The analyst saying growth rate of 3% could not achieve beyond 3% when he was Finance minister for 4 years under PPP.

IMF/WB will confirm it.

5.7% can be achieved if the agri sector perform better this year.

No news about base year change otherwise earlier dar said it would be done in fy 2015-16

Every country that has succeeded in increasing its GDP has worked on lowering its inflation rate beforehand..Pakistanshould work on that if it is not already doing it..

inflation rate is below 2%
 
Pakistan ccould had achieved 5.2% growth this year if the agri sector had performed like last year(not the target).

The analyst saying growth rate of 3% could not achieve beyond 3% when he was Finance minister for 4 years under PPP.

IMF/WB will confirm it.

5.7% can be achieved if the agri sector perform better this year.

No news about base year change otherwise earlier dar said it would be done in fy 2015-16



inflation rate is below 2%
Very good sign..
 
There will always be some inflationary tendencies in rapidly growing economies as the disposal income increases with goods & services struggling to keep up with the demand. In my view one should look at the ‘Real’ GDP growth rate rather than the ‘Nominal’ GDP growth rate to assess factual increase in the economy.

It is possible to achieve high GDP growth rate thru capital intensive export led industries or thru service sector such as Banking & Insurance, IT etc. For a country with the abnormally high population growth of 2.7% per annum, such industries, while increasing the overall wealth of the country, are not much help in reducing the poverty. In fact would probably increase inequality in income distribution. In other words, Rich likely to get even Richer while poor remain poor. Such a scenario would also increase shift of the rural population to the cities causing slums and increasing crime.

In my humble opinion, for a country like Pakistan job creation and increasing the productivity of the labour force is far more important. For this purpose focus should be on labour intensive industries and increasing skills & productivity of the rural labour force.

For example, Pakistan is suffering from housing shortage, low cost housing construction in both the rural & urban areas are need of the day. This would help job creation in both the urban & rural areas. In addition, Industries such live-stock for meat & dairy products, horticulture & agricultural goods such as tractors and fertilizer production would provide employment for relatively unskilled rural population.

Pakistan is going to be severely short of water, therefore we must move away from gravity based irrigation and shift to ‘Drop by drop’ irrigation relying on manual labour rather than on computer control. All the canals & feeder channels need to be cemented to reduce water seepage, creating job opportunities for rural population. Most important of all being the energy sector and eliminating the power & gas shortage.

I did not imply that we should ignore capital intensive manufacturing sector altogether, only that low cost, labour intensive industries should be allocated more resources.

In my view, our national aim should be to create a more equitable society where the gap between the ‘Haves’ & the ‘Have nots’ is less. For this achieving a higher growth rate is not as important as creating more employment opportunities. Oldies would notice that such expectations were the real reason for the popularity of ZA Bhutto and the People Party. Sadly that dream turned sour.
 
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In my opinion economic development is the most important job of the government. I came across this article after I had written the above post. The author is far more knowledgeable about economic matter than I and in my opinion it is a must read for all genuinely interested in the economic development of Pakistan.


The fight against poverty
By Tahir Habib Cheema
July 25, 2016

Part - 1

Neither development experience nor the effects of social programmes are uniform across the world. There are specific social forces, state structures and individual behaviours that pave way for a development policy to be successful.

Defining and measuring development in economic terms only, while ignoring social inequalities, can lead to serious miscalculation and evaluation of risks associated with social issues like poverty and inequality. A marked difference in the speed and span of the effects of social policies and programs in Asian and Latin American countries confirm this argument. Let us explore why similar social programmes prove to be effective is some countries but fail to achieve the same goals in others.

Social structures lead to social forces which are critical for developing institutions and policies. The success of Asian countries such as South Korea is a result of these formal and positive social forces. Weak, informal and fragmented social institutions in the Latin American countries, for instance Chile and Mexico, have resulted in less efficient social policy results.

Inequality is a result of uneven distribution of power and resources between social groups formed on the basis of these social forces. South Korea already had low levels of inequality and effectively reduced poverty to move from the list of aid recipients to aid donors based on its rapid industrialisation. Chile is still facing serious inequality despite reducing its poverty levels, whereas Mexico is unsuccessful in dealing with both high levels of poverty and inequality.

South Korea was one of the world’s poorest countries after the Korean War with per capita income of $65. The economic transition of the country started in the 1960s and led it to a very high rank of 12 out of 187 countries on the Human Development Index in 2012.This development experience drew strength from the strong state structure and significant amount of foreign aid which helped in economic and political development. Social movement at the grassroots level helped empower the less privileged population. The policy of land reforms reduced income disparity by distribution of land.

Labour-intensive export-oriented industrialisation sectors were encouraged to develop and grow. This added countless jobs to the market with a significantly positive impact on the overall economic condition of the country. Development and implementation of effective and targeted policies was the result of an efficient bureaucracy. Korea experienced an economic miracle during 1960s and 1970s based on these effective policies that transformed the nation from poverty to wealth.

Due to a weak central government, the development experiences of Chile and Mexico have been quite poor. Both internal and external elements have restricted the development pace of these countries. A mobilised working class and the influence of political pressures on policies and social programmes made the objectives vague.

A lack of external economic and political support for these countries put them at a disadvantage to introduce social development programmes. And lack of political will and capital reduced funding for these programmes.

There was a strong opposition in Chile to land reforms which seriously affected development of rural areas and households. Similarly, the benefits of the social programmes in Mexico were not widespread due to strong labour unions, which limited the effects to certain groups. The selective and unequal nature of social programmes in these countries resulted in increasing inequality.

Latin American countries have focused more on Conditional Cash Transfers which have shown limited impact questioning the market-oriented approach of the policy towards reducing poverty as compared to need for a multidimensional approach.

One of the major issues with development policymaking is a general tendency to ignore micro approach towards the issues on hand. On the contrary most of the efforts are directed towards looking at the causes in a macro perspective. The same is true for poverty and its effects. Generally the resources are spent with an objective to deal with the bigger causes of poverty, whereas its practical effects like poor health, and violation of basic rights are ignored.

Pakistan is facing a great challenge in the worsening poverty and inequality situation in the country. More than a half million of the population is facing multidimensional poverty, exposing them to the harmful effects of poor health, lack of education, inadequate living standards, low income, poor working conditions and violence threats. No doubt there have been efforts made both by the public and private sectors but nothing significant has been achieved yet. Comparing Pakistan’s poverty situation with the experiences of countries like South Korea, Chile and Mexico, it can be very conveniently said that the country lacks a strategic approach towards designing and implementing focused social programmes to deal with this critical issue.

There is a need to answer the question: why are similar social programmes effective in some countries but fail in others? The concerned policymakers in Pakistan have a lot to learn from the contrasting experiences of the Asian and Latin American countries as discussed.

To be continued

The writer is a public policy graduate from Carnegie Mellon University.

Email: tahir.cheema@fulbrightmail.org

https://www.thenews.com.pk/print/137416-The-fight-against-poverty
 
I was just wondering - do these agencies gather this data independently or is this data provided by the respective governments?
 
Diaspora's 2016 Remittances to Pakistan Rise 5.1% to $20.5 Billion

Overseas Pakistanis sent home $20.5 billion in remittances in 2016, an increase of 5.1% over 2015, according to the World Bank. Pakistan's remittances are 7.5% of its 2015 GDP of $270 billion.

Pakistan's Declining Exports:

The increase in remittances from the diaspora is welcome news in Pakistan suffering from precipitous 12% decline of export earnings and gaping 35-year high trade deficit of $24 billion in 2016.

The World Bank report said 2016 remittances to India declined by 5% to $65.5 billion while Bangladesh received $14.9 billion, a decrease of 3.5% from the previous year.

Declining Remittances to South Asia:

Remittances to South Asia region as a whole declined by 2.3 percent in 2016, following a 1.6 percent decline in 2015. Remittances from the oil-rich GCC countries continued to decline due to lower oil prices and labor market ‘nationalization’ policies in Saudi Arabia, according to the report.




Top Recipients of Remittances:

The top recipients of remittances in 2016 are, India ($65.%b), China ($65.2b), the Philippines ($29.1b), Mexico ($28.1b) and Pakistan ($20.3b) and, in terms of remittances as a share of GDP, Nepal (32.2%), Liberia (31.%), Tajikistan (28.8%), Kyrgyz Republic (25.7%) and Haiti (24.7%).

Pakistan is not alone in seeing its exports decline amid weakness in world demand, particularly in Europe with its slowing economy. However, India's 2016 exports decline is much lower at 5.5% and India's trade deficit actually shrank.

Summary:

Increase in remittances to Pakistan is good news, especially amid declining worldwide remittances. However, Pakistan can not continue to count on remittances from overseas workers in the midst of low oil prices affecting the GCC nations where millions of Pakistanis work. It must take urgent steps to boost exports and lower its trade deficit to avoid yet another bill-of-payments crisis requiring yet another IMF bailout.

Related Links:

Haq's Musings

Pakistani Diaspora

CPEC to Add Over 2 Million New Jobs in Pakistan

ADB Raises Pakistan GDP Growth Forecast

Is Pakistan Ready For War With India?

India's Israel Envy: Surgical Strikes in Pakistan?

Growing Middle Class in Pakistan

Rising Energy Consumption

China-Pakistan Economic Corridor

Pakistan's Thar Desert Sees Development Boom
 
Pakistan lags behind India, Bangladesh in economic growth: report
By News Desk
Published: October 10, 2016
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kistan’s economic activity is projected to gradually accelerate over the medium term reaching 5.0 per cent in 2017 and 5.4 per cent in 2018. PHOTO: REUTERS

Pakistan’s GDP growth rate is lagging behind that of India and Bangladesh, a report by the World Bank found.

While India is named as the fastest growing economy in the region, Pakistan sits behind Bangladesh, Bhutan and Nepal in growth rates. India’s economic activity is expected to accelerate to 7.7 per cent in 2017, after maintaining a solid 7.6 per cent in 2016 due to a growth in consumption – boosted by normal monsoon and civil service pay revisions, the report reveals.

$1b Sukuk proves global confidence in Pakistan: Dar

On the other hand, “Pakistan’s economic activity is projected to gradually accelerate over the medium term reaching 5.0 per cent in 2017 and 5.4 per cent in 2018, building upon 4.7 per cent GDP growth at factor cost in 2016 (5.7 per cent at market prices).” The report adds that “economic growth is primarily driven by public and private consumption, however, some re-balancing in growth components is expected due to a rise in investment.”

This growth is the result of infrastructure projects under the China Pakistan Economic Corridor (CPEC) and related public investment. CPEC can also help accelerate growth in the domestic construction industry, as well as increase electricity generation.

Mixed picture of Pakistan’s economy

The report notes; however, that “sustainable and inclusive growth and poverty reduction will require greater private sector investment and the development of infrastructure in the medium term, as well as a continued focus on fiscal consolidation and structural reforms.”

The report indicates that Afghanistan’s economy is expected to make a slow recovery over the next three years, while in Bangladesh, most economic indicators remain stable.

Further, the report, published last week, seeks to examine ways in which the South Asian economy is gradually accelerating. Statistics show that economic growth is expected to gradually accelerate to 7.3 per cent in 2017 from 7.1 per cent in 2016 in South Asia.

Govt’s savings offset by unchecked borrowings

However, the region also suffers from a challenging business environment leading to more insecurity and uncertainty, which could have a negative impact on investor confidence. “Political economy risks are widespread across South Asia, and uncertainty will need to be managed, particularly with a view to creating an attractive environment for domestic and foreign investment alike,” said World Bank South Asia Region’s Chief Economist Martin Rama.
 
Every country that has succeeded in increasing its GDP has worked on lowering its inflation rate beforehand..Pakistan should work on that if it is not already doing it..
I don't think so, a balanced inflation is required for higher nominal output and minimizing the gap between GDPs in PPP and nominal.

If you only account nominal GDP growth, China's nominal GDP would be around $5.4 trillions today nowhere near official $10 trillions. But Inflation and Yuan appreciation are the factor which helped them to inflate their economy.
There's a very good reason that India is trying to maintain
it and Indian Economists are concerned by possible deflation due to demonetization (however, will be recovered with GST).
Meanwhile Japan is lagging because of lack of inflationary environment.:-)
 
Is Pakistan heading towards a serious debt problem?
or several months, Pakistani economists have been warning that the country is heading towards a serious debt problem that will destabilise the economy. The overall debt, estimated at 12.7 trillion rupees in 2016, is considerably higher than the 9.5 trillion rupees in 2013. External debt, at 73 billion dollars, has also increased substantially, compared to 61 billion dollars in 2013.

There is nothing wrong with debt in itself. Private businesses borrow happily, as long as the rate of return on the debt-financed investment is higher than the cost of borrowing. Similarly, countries should borrow if their Gross Domestic Product (GDP) growth is faster than the rate at which debt is serviced (interest plus principle payments).

However, governments can shift the bad consequences associated with debt to the private sector or to the next generation. ‘Feel good’ projects, that translate into votes, but do not help the economy, do this.

Good economists, therefore, look for early warning signs.

One sign is the size of the total debt relative to the economy (total debt to GDP ratio). If this ratio rises fast, the government will either increase taxes or borrow huge amounts from banks — thus raising interest rates.

The other warning sign concerns the external debt. The cost of external debt is incurred in foreign currency, so that the appropriate ratio to focus on is the cost of external debt service to exports. A rapid increase in this ratio depletes foreign reserves, triggers devaluation and increases the cost of debt.

Using Ministry of Finance data, the World Bank estimates the debt-to-GDP ratio to be at 67.4 per cent, considerably higher than the 60 per cent limit. Interest payments will thus continue to eat into the budget, squeezing much needed infrastructure and social sector investments.

The State Bank of Pakistan estimates that external debt service-to-exports ratio at 20 per cent for 2016, which is better than the 22.5 per cent last year. The worry, however, is that exports are stagnant, even declining (27.4 billion dollars in 2016, compared to 31.5 billion dollars in 2013), which means that our ability to service future external debt liabilities is eroding.

An important message, therefore, is that there be no surprises (unaccounted for contingent liabilities) in large debt -financed investments (including those associated with the China-Pakistan Economic Corridor), and that there be improvement of export performance.

Otherwise, debt service will become a huge burden on the economy.
 
Year-end alarm bells
Home / Today's Paper / Opinion / Year-end alarm bells
By Farrukh Saleem
January 01, 2017

Capital suggestion



Alarm bell number 1: From July to September, the federal government’s net revenue receipts stood at Rs369 billion. For the same period, the federal government’s debt servicing liability stood at Rs413 billion. Lo and behold, the federal government’s net revenue receipts are not even enough to cover debt servicing. For the record, net revenue receipts have never been so low ever.

The federal government must borrow to cover defence. The federal government must borrow to cover pensions – both civil and military. The federal government must borrow to cover the expenses of running the civil government. The federal government must borrow to cover public order and safety affairs. The federal government must borrow to cover environment protection. The federal government must borrow to cover health affairs. The federal government must borrow to cover the expenses on ‘culture and religion’. The federal government must borrow to cover all allocations for social protection.

Alarm bell number 2: For the first five months of the current fiscal year, the repatriation of foreign exchange in the form of profits and dividends on foreign direct investment stood at $591 million. For the first five months of the current fiscal year, the total foreign direct investment stood at $460 million. Lo and behold, Pakistan paid out $131 million more than what Pakistan received as foreign direct investment.

What this means is that foreigners are taking out more dollars from Pakistan than the dollars being invested into Pakistan by foreigners. This is both scary and unsustainable.

Alarm bell number 3: From July to November, our exports stood at $8.7 billion. For the period between July and November, our imports stood at $17.3 billion. Lo and behold, Pakistan’s goods deficit stood at a colossal $8.6 billion. For the period between July and November, the current account deficit reached $2.6 billion, widening by an alarming 91 percent year-on-year. On a pro-rata basis, an annual current account deficit in excess of $6 billion is both scary and unsustainable.

Alarm bell number 4: Between June 2013 and June 2016, the government took dollar loans. From the World Bank, ADB and Islamic Development bank, it took $9.7 billion. From the IMF, it borrowed $6.2 billion. Bilateral loans amounted to $3.6 billion while bonds issued stood at $3.5 billion. From commercial banks, it took $1.85 billion. That’s a total of $25 billion over three years (over the same period, $11.95 billion was spent in the repayment of previous loans). To be certain, all these new foreign loans would have to be paid back in dollars. Lo and behold, our exports are going down and foreign investors are taking out more dollars than they are bringing into Pakistan. Again, this is scary and unsustainable.

Alarm bell number 5: On October 13, the IMF completed its twelfth and the final review under the $6.2 billion Extended Arrangement. To be sure, the budget for 2016-17, under the direction of the IMF, kept a cap of 3.8 percent of GDP on the budgetary deficit. The IMF plan has come to an end and the election is coming up. Now, prepare for a ballooning budgetary deficit.



The writer is a columnist based in Islamabad.

https://www.thenews.com.pk/print/175908-Year-end-alarm-bells
 
Year-end alarm bells
Home / Today's Paper / Opinion / Year-end alarm bells
By Farrukh Saleem
January 01, 2017

Capital suggestion



Alarm bell number 1: From July to September, the federal government’s net revenue receipts stood at Rs369 billion. For the same period, the federal government’s debt servicing liability stood at Rs413 billion. Lo and behold, the federal government’s net revenue receipts are not even enough to cover debt servicing. For the record, net revenue receipts have never been so low ever.

The federal government must borrow to cover defence. The federal government must borrow to cover pensions – both civil and military. The federal government must borrow to cover the expenses of running the civil government. The federal government must borrow to cover public order and safety affairs. The federal government must borrow to cover environment protection. The federal government must borrow to cover health affairs. The federal government must borrow to cover the expenses on ‘culture and religion’. The federal government must borrow to cover all allocations for social protection.

Alarm bell number 2: For the first five months of the current fiscal year, the repatriation of foreign exchange in the form of profits and dividends on foreign direct investment stood at $591 million. For the first five months of the current fiscal year, the total foreign direct investment stood at $460 million. Lo and behold, Pakistan paid out $131 million more than what Pakistan received as foreign direct investment.

What this means is that foreigners are taking out more dollars from Pakistan than the dollars being invested into Pakistan by foreigners. This is both scary and unsustainable.

Alarm bell number 3: From July to November, our exports stood at $8.7 billion. For the period between July and November, our imports stood at $17.3 billion. Lo and behold, Pakistan’s goods deficit stood at a colossal $8.6 billion. For the period between July and November, the current account deficit reached $2.6 billion, widening by an alarming 91 percent year-on-year. On a pro-rata basis, an annual current account deficit in excess of $6 billion is both scary and unsustainable.

Alarm bell number 4: Between June 2013 and June 2016, the government took dollar loans. From the World Bank, ADB and Islamic Development bank, it took $9.7 billion. From the IMF, it borrowed $6.2 billion. Bilateral loans amounted to $3.6 billion while bonds issued stood at $3.5 billion. From commercial banks, it took $1.85 billion. That’s a total of $25 billion over three years (over the same period, $11.95 billion was spent in the repayment of previous loans). To be certain, all these new foreign loans would have to be paid back in dollars. Lo and behold, our exports are going down and foreign investors are taking out more dollars than they are bringing into Pakistan. Again, this is scary and unsustainable.

Alarm bell number 5: On October 13, the IMF completed its twelfth and the final review under the $6.2 billion Extended Arrangement. To be sure, the budget for 2016-17, under the direction of the IMF, kept a cap of 3.8 percent of GDP on the budgetary deficit. The IMF plan has come to an end and the election is coming up. Now, prepare for a ballooning budgetary deficit.



The writer is a columnist based in Islamabad.

https://www.thenews.com.pk/print/175908-Year-end-alarm-bells
He is wrong, these are not Alarm Bells. Time for alarm has already gone past, event has already started. Drastic measures are needed to contain the damage.
 

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