ISLAMABAD, Jun 9 (APP): Despite achieving a real Gross Domestic Product (GDP) growth of 5.97 percent in Fiscal Year (2021-22), the economy of the country has been facing several challenges at domestic as well as international front, according to Pakistan Economic Survey 2021-22.
According to the pre-budget document, launched here by Federal Minister for Finance and Revenue, Miftah Ismail, inflation was running too high so the prospects for future growth in potential output are challenging.
Fiscal deficit is at a level where its financing is becoming challenging while high trade deficit is leading to external imbalances putting extra pressure on foreign reserves and on the exchange rate.
Economic growth seems to be slow down next year, it said adding high uncertainties were restricting market confidence.
In the short run, Pakistan is confronted with the challenge to finance its external finance requirements stemming from current account deficits and foreign debt servicing.
Successful conclusion of the seventh review of Pakistan’s reform program which is supported by an International Monetary Fund (IMF) Extended Fund Facility arrangement is on the right direction, it added.
The government is very much committed to ensure the stability and confidence in the economy, it said adding the stable fiscal policy with a higher, growth promoting path for PSDP, based on physical and human capital development will be obligatory.
Likewise, subsidies targeted to stimulate development of innovative industries and services will be essential.
On the revenue side, growth-oriented revenue policies will be helpful, according to survey and there was intense need of creating an environment conducive for investments.
It said, investors and consumers need to be convinced of a long term sustainable and inclusive growth project that inspires confidence in Pakistan’s economic future and that induces them to take initiatives in their own and in the country’s interest.
Thus, well-functioning competitive markets is required and there is also need to continue policies which brought improvement in related sectors.
For example, it said, Prime Minister’s Agriculture Package and related agricultural policies remained more effective for better agriculture performance. Likewise, policies related to energy mix and efficient energy supplies. Furthermore, there is also need of stable legislative and political culture.
As a result of these, it is expected that potential output growth will be upgraded, resulting in higher employment and real income growth.
It will also create additional capacity for exports and import substitution and a stable exchange rate environment. Thus, demand management fiscal and monetary policies should on average be neutral and play their role of cyclical stabilizers when temporary shocks create deviations from the long-term growth path.
Elaborating on details of economic performance, the survey said, the agriculture sector posted growth of 4.4 percent mainly due to 6.6 percent growth in Crops and 3.3 percent growth in Livestock. The growth in crops was recorded on account of 7.2 percent growth in Important Crops, 5.4 percent growth in Other Crops, and 9.2 percent growth in Cotton Ginning.
Industrial sector recorded a growth of 7.2 percent in FY2022 compared to 7.8 percent growth in FY2021.
Industrial sector performance is more dependent on the Manufacturing sector which has a share of 65.0 percent in the industry. Within Manufacturing, Large-Scale Manufacturing (LSM) holds 74 percent while its share in the industry is 48 percent.
However, LSM is reflected by Quantum Index Numbers (QIM) data. During July – March FY2022, the QIM index posted a growth of 10.4 percent and major contributors to this growth remained Food (11.7%), Tobacco (16.7%), Textile (3.2%), Wearing Apparel (34.0%), Wood Products (157.5%), Chemicals (7.8%), Iron & Steel Products (16.5%), Automobiles (54.1%), Furniture (301.8%) and other manufacturing (37.8%).
Likewise, services sector still constitutes the largest share of 58 percent in GDP even in the new methodology used for the Change of Base of National Accounts on 2015- 16. However, in the new methodology, the services sector has been divided into Ten subsectors.
On the other hand, the investment to GDP ratio is stuck between 14 to 15 percent, thus placing it 133 among 151 countries for year 20211. Even in Bangladesh, the investment to GDP ratio is 30.5 percent
