Economy to grow by 4.3 percent in fiscal year 2010

[Neo]

Economy to grow by 4.3 percent in fiscal year 2010

ISLAMABAD (May 15 2010): Pakistan's economy has shown more resilience than expected and is likely to grow by 4.3 percent in the current fiscal, says an official document. GDP was earlier targeted at 3.3 percent for 2009-10. "Pakistan's GDP growth in 2009-10 will be around 4.3 percent because of rebound in services sector plus a recovery in manufacturing sector," says a document prepared for the National Accounts Committee meeting.

Manufacturing saw a visible recovery when its large-scale manufacturing (LSM) sector grew by 4.36 percent positive than minus 7.7 percent, making a positive change of almost 21 percent for the current year despite an acute energy crisis in the country. Had there been lesser shortage of electricity economic growth would have reached near 5 percent, says an official.

Pakistan is now near an opportunity to turn the tables by maintaining this growth trajectory to achieve about 5 percent growth rate which can cause a significant dent in poverty in the next two years, says an official who would be participating in the National Accounts Committee meeting.

Agriculture sector would be a poor performer at 2.2 percent against an unrealistic target of 3.8 percent for 2009-10 and against a bigger base of 4.7 percent of last year. Pakistan's agriculture sector hardly crossed 5 percent in its over 60 years' history.

Services sector came to the rescue this year at 6.59 percent against a target of 3.9 percent and almost similar performance of 3.6 percent last year. Overall growth in manufacturing sector is at 3.54 percent against a target of 1.8 percent and previous year's negative performance of 3.6 percent.

Business Recorder [Pakistan's First Financial Daily]

[Neo]

It's great news, shows the determination of current government to bring the economy back on trail. Though many won't agree with the calculations I can assure you that its correct. Economy will grow faster in coming years and we'll see a leap in the real as well as nominal GDP as the base year will change soon. Current calculations are based on index 2004 IIRC.

[Zaki]

Govt adopts novel tactic to project higher growth rate

By Khaleeq Kiani


ISLAMABAD, May 16: The government has revised current year’s real economic growth rate at 4.1 per cent – much higher than the 3.3 per cent announced earlier – mainly because of a major downward revision in growth and production figures for the last two years.
Informed sources told Dawn on Sunday that last year’s (2008-09) real economic growth (commonly defined as Gross Domestic Product) rate had been revised downwards to a paltry 1.2 per cent from two per cent announced and hitherto acknowledged by the government. Likewise, the real GDP growth rate for 2007-08 has also been brought down to 3.7 per cent from previous estimates of 4.1 per cent.

The revised growth estimates have been compiled on the basis of reconciled data for the last two years and were expected to be approved by a National Accounts Committee (NAC) meeting to be held on Tuesday (May 18). The NAC, comprising federal and provincial economic ministries and agencies, is the highest forum to approve annual economic data and its findings become the basis of next year’s national economic planning and budget making.

“The downward revision in 2008-09 growth estimates has provided a substantial cushion to push up current year’s growth rate (at constant factor cost of 19992000) by about 1.2 percentage points to 4.1 per cent of GDP,” a government official said. He said there was nothing wrong with the upward revision in current year’s growth rate because reduction in last year’s rate was based on actual and reconciled economic figures.

Other major contributors to growth during the current fiscal year were services (60 per cent contribution), followed by industry at 30 per cent and agriculture 10 per cent. In terms of individual sector, manufacturing accounted for 23 per cent of the current year’s overall growth, followed by wholesale and retail trade at 21 per cent and social and community services at 19 per cent.

This is despite the fact that gross fixed capital formation (GFCF) at current market prices has been estimated to have declined by 0.6 per cent after recording a 5.5 per cent increase in 200809. The private sector has accounted for the decline with an estimated contraction of GFCF of 3.5 per cent for the year. The bulk of the decline has happened in electricity, gas, large-scale manufacturing, transport & communication and finance and insurance. General government GFCF is estimated to have increased by 9.8 per cent.

INDUSTRY: The industry recorded a growth rate of 4.90 per cent this year, significantly higher than the targeted 1.7 per cent. The mining and quarrying contracted by 1.7 per cent against a target of 2 per cent increase over the last year. However, manufacturing is estimated to have grown by 5.1 per cent, substantially higher than the 1.8 per cent growth target.

The sources said that large-scale manufacturing grew by 4.3 per cent during the current year against a target of 1 per cent. Small-scale manufacturing, too, increased at the rate of 7.5 per cent, significantly higher than targeted 3 per cent.

SERVICES SECTOR: Another major contribution in higher than the planned growth rate came from services sector this year. The government had set a growth target of 3.9 per cent for services for the outgoing year but this sector is estimated to have improved by 4.56 per cent.

AGRICULTURE: The sources said the agriculture sector growth rate at 2 per cent had remained significantly short of 3.8 per cent target set for the current year. The government had set a growth rate of 3.5 per cent for major crops but it declined by 0.2 per cent. Likewise, output of minor crops reduced by 1.2 per cent against a growth target of 4 per cent while livestock growth rate was recorded at 4.1 per cent against a target of 4 per cent.

This is despite the fact that output of almost all major crops — except cotton — was lower than last year’s production. For example, the wheat output at 23.864 million tons is 0.7 per cent less than 24.033 million tons last year. Cotton output at 12.7 million bales is 7.4 per cent higher than last year’s 11.8 million bales.

Rice production this year at 6.88 million tons is 1 per cent lower than last year’s 6.95 million tons while sugarcane output at 49.4 million tons was 1.3 per cent less than 50.05 million tons last year or 23 per cent less than 64 million tons in 2007-08. Maize production stood at 3.49 million tons against last year’s 3.59 million tons, down by 3 per cent.

Likewise, gram production stood at 571,000 tons against last year’s 741,000 tons, significantly down by 23 per cent. Jowar and Bajra production were also lower by 6.3 per cent and 1.1 per cent respectively.


Dawn ePaper

[A1Kaid]

Hopefully we can return to our previous GDP levels during the Musharraf era of a GDP growth rate of 7.0%+.

[Neo]

NAC estimates 4% GDP growth

* Large scale manufacturing growth to be 4.3 percent, agriculture growth rate to fall to 2 percent

ISLAMABAD: The National Accounts Committee (NAC) has estimated the gross domestic product (GDP) growth rate to reach 4.09 percent against an earlier target of 3.3 percent for the ongoing fiscal year 2009-10, official sources told Daily Times on Tuesday.

The NAC met at the Planning Commission to examine the performance of various sectors of the economy with the Planning Commission deputy chairman in the chair.

According to the figures finalised by the NAC, GDP growth had been worked out at 4.09 percent in the ongoing year 2009-10, against the downward revised target of 1.2 percent in comparison to 2008-09.

Overall, the manufacturing sector performed well in the ongoing year and recorded a growth of 5.1 percent as compared with a negative growth of 3.7 percent in the previous fiscal year.

Sectors: Large scale manufacturing (LSM) growth has been determined at 4.3 percent for the ongoing year as compared to the negative growth of 8.2 percent in the last fiscal year.

The agriculture growth rate was estimated at 2 percent in the ongoing fiscal year compared with 4 percent growth in the previous one.

The production of major crops recorded a negative growth of 0.2 percent in the ongoing fiscal year compared with 7.3 percent positive growth in the last fiscal year.

Minor crops’ production also witnessed a negative growth of 1.2 percent in the ongoing fiscal compared with negative growth of 1.7 percent in the last fiscal year.

However, production in the livestock sector helped the agriculture sector, with livestock production recorded at 4.1 percent in the ongoing fiscal compared with of 3.5 percent in the previous fiscal.

In the construction sector, growth picked up in the ongoing fiscal and was estimated to arrive at 15 percent, against a negative growth of 11.2 percent in the last fiscal year.

The services sector, which had been contributing largely to the GDP growth in recent years, posted a growth of 4.6 percent in the ongoing fiscal as compared to 1/6 percent growth in the last fiscal year.

The wholesale trade and retail businesses also posted a positive growth of 5.1 percent in the current year.

The NAC also revised downwards the GDP growth from 2 percent to 1.2 percent for the last fiscal year 2008-09, as well as the GDP growth of 4.1 percent to 3.7 percent for the fiscal year 2007-08.

According to the latest figures, electricity and gas consumption in the country also recorded a growth of 7.8 percent in the fiscal 2009-10.

Daily Times - Leading News Resource of Pakistan

[Neo]

Economy expands 4.09pc in FY10

Wednesday, 19 May, 2010

ISLAMABAD: The National Accounts Committee (NAC) on Tuesday noted that the country’s real gross domestic product (GDP) grew by 4.09 per cent in 2009-10 against the target of 3.3 per cent.

According to the figures presented to the NAC, the overall manufacturing sector performed well and recorded a growth of 5.1 per cent this fiscal year compared with negative growth of 3.7 per cent in 2008-09.

The Large Scale Manufacturing (LSM) expanded by 4.3 per cent in 2009-10 against the negative growth of 8.2 per cent the previous fiscal year.

The NAC meeting was held in the Planning Commission Auditorium and chaired by the deputy chairman Planning Commission to review the performance of the key sectors.

The committee was informed that the latest figures showed electricity and gas consumption recorded a growth of 7.8 per cent in 2009-10.

The per capita income had been determined at Rs35,216 on constant prices while the per capita income based on current prices would be determined in few days, an official of the Planning Commission said.

The meeting was informed that the overall agriculture growth had been estimated at two per cent in 2009-10 compared with four per cent growth in 2008-09.

However, the major crops recorded a marginal negative growth of 0.2 per cent in the current fiscal year compared to 7.3 per cent growth last fiscal year.

Similarly minor crops also witnessed as negative growth 1.2 per cent in the ongoing fiscal compared with negative growth of 1.7 per cent in the last fiscal year.

However, production in the livestock sector rescued the agriculture sector and livestock production had been recorded at 4.1 per cent compared with a positive growth of 3.5 per cent 2008-09.

The construction sector witnessed growth of 15 per cent against the negative growth of 11.2 per cent in the last year.

The services sector which had been a key contributor to GDP growth for several years posted a growth of 4.6 per cent in 2009-10 compared with 1.6 per cent growth in 2008-09.

DAWN.COM | Business | Economy expands 4.09pc in FY10

[Neo]

Pakistan’s economy likely to grow by 4.1pc in 2009/10

Sunday, May 23, 2010

ISLAMABAD: Pakistan’s economy is likely to grew by 4.1 per cent during the fiscal year ended on June 30, above a target of 3.3 per cent and is expected to grow even faster during the next fiscal year, a statement said.

The government had earlier expected 3.3 per cent economic growth during 2009/10 (July-June) fiscal year, but officials said a rebound in the large-scale manufacturing sector and a strong performance in services sector contributed to the higher growth projection.

The Planning Commission, which prepares the growth targets, held a meeting on Friday to review economic performance and set the targets for the next fiscal year.

“During the current fiscal year, the achieved GDP growth rate is 4.1 per cent as against the target growth rate of 3.3 per cent,” the Planning Commission said in a statement.

“The GDP growth for the next year has been projected at 4.5 per cent on assumptions that the agriculture sector will grow by 3.8 per cent, manufacturing sector by 5.6 per cent and the services sector by 4.7 per cent,” it said.

Large-scale manufacturing contributed a major share to the growth in the outgoing fiscal year with a 4.4 per cent increase, after having declined to 3.7 per cent during 2008/09, an official of the Planning Commission said.

The services sector surpassed its 3.9 per cent target and grew by 4.6 per cent in 2009/10, the official said, adding that the next year’s target has been set at 4.7 per cent.

The agriculture sector’s growth fell to 2.0 per cent in 2009/10 against 4.0 per cent last year, but it was showing signs of stability, the official said.

Lower production of major crops, including sugar, was a major reason for the decline, he said.

The National Economic Council (NEC), a top economic decision-making body, will meet on May 28 to give final approval to the yearly targets.

Inflation: The commission has recommended an inflation target of 8 per cent for the next fiscal year, the official said.

The central bank has forecast inflation for the whole of 2009/10 to average between 11.0 per cent and 12.0 per cent.

The consumer price index (CPI), a key indicator of inflation, rose 13.26 per cent in April from a year ago.

The central bank is widely expected to keep its key policy rate unchanged at 12.5 per cent when it sets the monetary policy for the next two months on Monday, as inflation still poses a threat, it said.

The International Monetary Fund (IMF), which bailed out Pakistan in 2008 to avert a balance of payments crisis, has repeatedly urged caution in cutting rates, listing persistent inflation as one of the worries for Pakistan’s economy.

Pakistan’s economy likely to grow by 4.1pc in 2009/10

[Neo]

SBP raises 2009/10 GDP growth forecast

KARACHI (: June 01, 2010): Provisional estimates of National Income Account's Committee suggest that Pakistan's real gross domestic product (GDP) growth will rebound to 4.1 percent in the current fiscal year (FY10) compared with an anaemic 1.2 percent last year on the back of above-target growth of livestock, large-scale manufacturing and services sectors.

According to the 3rd quarterly report issued by State Bank of Pakistan on state of economy here Tuesday.

The current account deficit has fallen sharply with foreign exchange reserves improving and although the fiscal deficit is expected to be above target, borrowings from the central bank have so far been low relative to past years.

"The resulting improvement in business confidence, together with reasonable harvests, expansionary fiscal stance, and a small recovery in the global economy have fostered growth in FY10," the report said while outlining reasons behind expected rebound in the economic growth.

It said that projections for the current account deficit indicate an improved picture with the deficit now expected to fall even lower, in the range of 2.2 - 2.8 percent of GDP during FY10, substantially lower from earlier forecasts of 3.2- 3.8 percent of GDP and actual deficit of 5.7 percent of GDP seen in FY09. "This improvement is mainly due to an impressive performance of exports and workers' remittances," it added.

However, it pointed out that as far as inflation was concerned, resurgence in inflationary pressures during second half of FY10 was anticipated. The Report said that annual average headline Consumer Price Index (CPI) inflation will be slightly higher than estimated earlier, falling in the range of 11.5 12.5 percent during FY10. "The upward revision in the forecast range indicates that inflationary pressures strengthened in the economy," it added.

According to the report, after posting a modest recovery in first half of FY10, the LSM growth gathered further pace in the third quarter of FY10. Re-entry of commercial banks in consumer financing helped strengthen the demand for consumer durables, especially automobiles, despite rising cost pressures, it said and added export-based industries, particularly value-added textile, finally picked-up in response to improved global demand as well as domestic policies.

Similarly, it pointed out that agriculture sector is expected to post a below target growth rate mainly due to water shortages and unfavorable weather conditions during most of FY10.

Contrary to expectations that growth by minor crops would be strong due to switch over of area from major to minor crops, recent information suggests that most of the minor crops also suffered from lower winter rains during FY10. It said while a positive development during FY10 was a significant contribution of agriculture in exports, this resulted in relatively higher domestic prices of most surplus agri-produce.

It was also pointed out that the country's trade deficit contracted by 13.9 percent during July-April FY10 against 15.6 percent

decline recorded in the same period last year. "This contraction in the trade deficit was the result of a 2.8 percent Y-o-Y fall in the imports, which was complimented by an encouraging 8.0 percent Y-o-Y rise in the exports. The Report estimated that countrys overall exports and imports are likely to remain in the range of $19.5 billion to $20 billion and $31 billion to $31.5 billion, respectively in FY10.

However, the Report opined that the fiscal performance has remained lackluster. SBP estimates for fiscal deficit have been revised upwards to 5.1 5.6 percent of GDP, it said and added main factors behind pressures on fiscal accounts are rising current expenditure and a low tax to GDP ratio. Implementation of value added tax (VAT) could be an appropriate remedy if supported by appropriate systems to curtail misuse of VAT refunds, it said and added even though tax collection is likely to drop during the initial phase of implementation, tax collection and documentation in the economy will improve in later years.

It said that the impact of the high fiscal deficit was compounded by shortfall in external receipts and the latter contributed to lower liquidity in the banking system and problems in financing the current account deficit. It said the central bank continued to inject liquidity in the banking system during most of the year to mitigate part of the impact of the pressures from fiscal and quasi-fiscal operations, but overnight rates have remained close to the ceiling during most of the fiscal year. Similarly, despite a sharp decline in the current account deficit, the overall external account position remains vulnerable, since financing receipts have also plummeted, it said and reiterated that the sustainability of the current account depends on a country’s ability to finance it preferably from the non-debt creating inflows.

The SBP report asserted that the country has to move aggressively to attract fresh investment by implementing additional reforms to increase economic efficiency and improve the business environment.

Steps to increase investment must also be accompanied by measures to foster savings, it said and added that the SBP is looking to increase the access of people to the financial system, and also introducing projects to improve the transmission of policy rates to savers.

"The greater impact is likely to be through improving institutional savings, for which there is an urgent need to reform the institutional structure of pension and provident funds in the country, to foster the expansion of the pool of long-term savings," the report added.

SBP raises 2009/10 GDP growth forecast : Business Recorder | LATEST NEWS

[Neo]

State Bank paints gloomy picture of economy

* Central bank’s third quarterly report says agricultural growth expected to remain below target
* Overall external account position to remain vulnerable despite sharp decline in current account deficit
* Fiscal deficit to be much higher than earlier estimates
* Country has to move aggressively to attract fresh investment

KARACHI: The State Bank of Pakistan on Tuesday painted a gloomy picture of the country’s economic condition, saying the agriculture sector’s growth was expected to remain below target and the fiscal deficit mark was going to be much higher than earlier estimates.

The report also said that the overall external current account position would remain vulnerable.

The SBP revealed the figures in its third quarterly report on the country’s economy.

The report said the agriculture sector was expected to post a below-target growth rate, mainly due to water shortage and unfavourable weather conditions during the ongoing year.

Contrary to earlier expectations that minor crops would return strong growth figures due to switch over of area from major to minor crops, recent information suggests that most of the minor crops also suffered due to lesser rains during the winter.

While agriculture produce contributed significantly to exports, the trend resulted in high domestic prices, even of crops returning surplus harvest.

Despite that, the report said that the fiscal performance remained lacklustre. The SBP estimated the country’s fiscal deficit to arrive at between 5.1 and 5.6 percent of the GDP. It said the impact of high fiscal deficit was compounded by shortfall in external receipts.

Vulnerability: The SBP said the overall external account position would remain vulnerable despite a sharp decline in the current account deficit, since financing receipts had plummeted.

The report reiterated that the sustainability of the current account depended on the country’s ability to finance the deficit, preferably through non-debt-creating inflows.

The report said projections for the current account deficit indicated an improved picture, with the deficit now expected to fall even lower between 2.2 and 2.8 percent of GDP during the FY10, substantially lower from earlier forecasts of 3.2–3.8 percent and the FY09 deficit of 5.7 percent of the GDP.

“This improvement is mainly due to an impressive performance of exports and workers’ remittances,” the report said. However, the SBP pointed out that as far as inflation was concerned, resurgence in inflationary pressures during second half of the FY10 were anticipated.

The report added that the annual average consumer price index (CPI) inflation would be slightly higher than estimates, arriving in the range of 11.5-12.5 percent during the FY10.

Provisional estimates of the National Income Account Committee suggest that the country’s real GDP growth will rebound to 4.1 percent in the current fiscal year, compared with 1.2 percent last year.

The growth would mainly be a result of the above-target growth of livestock and the large-scale manufacturing (LSM) and services sectors.

The SBP said although the fiscal deficit was expected to be above the target, borrowings from the central bank have so far been less than in previous years.

The SBP said that after posting a modest recovery in the first half of the FY10, the LSM growth gathered further pace in the year’s third quarter. The return of commercial banks towards consumer financing helped strengthen the demand for consumer durables, especially automobiles, despite rising cost pressures, it said.

It said the main factors behind pressures on fiscal accounts were increasing current expenditure and a low tax-to-GDP ratio.

The SBP added that the country had to move aggressively to attract new investment by implementing additional reforms to increase economic efficiency and improve business environment.

The report also pointed out that the country’s trade deficit contracted by 13.9 percent during the July-April period of the FY10 against 15.6 percent decline recorded in the same period last year.

Daily Times - Leading News Resource of Pakistan

[Neo]

Pakistan's growth prospects: analysis

ARTICLE (June 05 2010): First the headlines; the economic survey is out, and looks unimaginably transparent, analytical, frank and forthright - something that reminds one of the survey documents prepared by Dr Arshad Zaman, way back in the 80s. And now the real news; Pakistan's economic growth is still 'fragile' demanding a 'cautiously optimistic' stance from policy makers and a series of tough reforms across the board.

The country's GDP growth for the year ended June 2010 stood at 4.1 percent, a number which could have been around 6 percent, according to finmin officials, if energy shortages hadn't stalled business activities all around the year. While that may sound like an exaggerated blame on energy woes, there is no doubt that power shortages will continue to weigh on the economy next year. And that - will be the real test for the economy.

So far this year, a rebound due to the low base affect helped bring about industrial growth. But with spare capacities gradually being utilised at different paces in different sectors, the question is whether the next year will witness the same level of growth. Aside from energy shortages, another key impediment is low capital formation.

The Economic Survey shows that total Gross Fixed Capital Formation (GFCF) fell by 0.6 percent, as the private sector witnessed a drop 3.5 percent. Included in this decline, is the 4.9 percent slide in manufacturing sector (down 12.4 percent in LSM) and 18.8 percent in the electricity and gas sector.

This is validated by the fact that the marginal propensity to consume in the private sector remained high at 80.5 percent of the GDP this year, while government expenditure increased from 8.1 percent to 8.9 percent. So, with not much change in net exports gross capital formation declined from 17.4 to 15 percent of GDP in the outgoing year.

And just as the LSM sector, small and medium businesses are likely to be strained. "The small and micro-enterprise sectors, which employ the bulk of the non-agricultural labour force, and are less well captured in the national accounts data, are much less insulated, and therefore significantly more vulnerable to shocks such as wide spread disruptions to energy supply," the survey aptly points out.

But what stands out as an even bigger concern is slowing farming growth, which eased to 2 percent in FY10 from 4 percent in the year before, and its falling contribution in economic growth. In 2009-10, the share of services in headline growth was roughly in line with its average, at 59 percent, but agri growth was much lower than its five year average.

"Despite its critical importance to growth, exports, incomes, and food security, the agriculture sector has been suffering from secular decline....with growth in the sector, particularly in the crop sub-sector persistently falling for the past three decades," the survey said.

And knowing that Pakistan is one of the world's most arid countries, farming growth looks structurally challenged in the next few years, unless the proposed plans to construct small and medium dams are actually implemented. "According to the benchmark water scarcity indicator, Pakistan's estimated current per capita water availability of around 1,066 M3, placing it in the "high water stress" category," the survey warns.

DOCUMENTATION & ENERGY Aiming to deal with potential hiccups in growth, the ministry needs a number of reforms. And central to these, amongst others, are documentation and formalisation of economy.

Be it a matter of agricultural reform, tax reform or a question of providing targeted subsidies to the needy, documentation holds the key. The good thing is that the ministry has recognised this in its survey by highlighting the policy disincentives towards formalisation of the economy.

The ministry also adds that pervasive mis-declaration and under-invoicing of imports, costs the economy anywhere between Rs 100 billion to Rs 300 billion in lost revenue yearly, according to certain estimates. The second significant issue is energy. The Economic Survey has rightly acknowledged that circular debt has caused a lot of problems, but now with tariff subsidies removed, there should be no more excuses in the future, blaming circular debt for underachievement.

The report also indicates that power line losses remain at previous year's level, which is an alarming sign as it would keep the pressure of circular debt on the fiscally constrained government. But then again, boosting energy infrastructure requires plenty of foreign investment, which might not be in the offing in the next few years, given the war against terrorism.

Pakistan's economy took a hit of $11 billion, on account of war on terror, this fiscal year - a number which is seen only growing in the years ahead. All in all, this survey seems like a decent, whole-hearted and unbiased effort to paint the economic condition of the country. One hopes that the underlined warnings and cautious approach advised by the makers of this report is heard in the relevant ministries before the fears cited by Sakib Sherani materialise.

================================================== ====================
GDP growth: Sectoral Contribution
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Sector FY05 FY06 FY07 FY08 FY09 FY10 Avg FY05-FY10
Agriculture 17 24 13 6 71 11 24
Industry 34 19 34 10 -41 30 14
Manufacturing 30 28 24 24 -58 23 12
Service 49 57 53 85 70 59 62
================================================== ====================
Source: FBS

Business Recorder [Pakistan's First Financial Daily]