Growth breakdown: Services contribute lion’s share to GDP growth

Agriculture and industry lag behind, SBP report reveals

ISLAMABAD: The services sector is a leading contributor to Pakistan’s economic growth and absorbs around one-third of the employed workforce, said a State Bank of Pakistan (SBP) report for fiscal year 2014-15.

According to the report, this sector has been growing more rapidly than the overall gross domestic product (GDP), pushing its share in GDP from 50.7% in fiscal year (FY) 2000 to 58.8% in FY15.



The report added more than 40% of the workforce in Pakistan was still engaged in agriculture, which gives lower productivity, is vulnerable to potential climate change and contributes only one-fourth to GDP.



On the other hand, the industry (where labour productivity is the highest) absorbs 23% of the labour force. Having performed poorly in recent years, its share in GDP fell.

The burden therefore falls on the services sector to steer the productivity growth, create sufficient jobs for the growing workforce and improve per capita income, the report added.

In FY15, the services sector grew 5%; though slightly lower than the target of 5.2%, still surpassed the FY14 growth of 4.4%.



In overall terms, this sector accounted for more than two-thirds of the GDP growth in FY15, the report said, adding within services, all sub-sectors contributed positively to the growth. However, the impetus came from general government and finance and insurance services. Since these two sectors had witnessed a sluggish growth in FY14, a sharp recovery was expected in FY15.

The increase in salaries explains a sharp rise in contribution from general government, whereas, the improvement in finance and insurance stems from strong performance by commercial banks (mainly driven by massive investments in risk-free government securities).

The remaining sub-sectors recorded a lower growth in FY15 than the last year, the report added. 

Published in The Express Tribune, January 5^th, 2016.

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