Think tank calculates GDP growth at 3.1%

Rejects govt claim that economy grew at 4.7% rate

ISLAMABAD: Pakistan’s economy grew at a pace of 3.1% in the outgoing financial year, an independent think tank claimed on Monday repudiating a claim by the government’s economic managers that the GDP growth rate was 4.7%.

The claim by the Social Policy and Development Centre (SPDC) has dealt a second major blow to the credibility of the Pakistan Bureau of Statistics (PBS) in less than a week. Earlier, the Policy Research Institute of Market Economy showed in a report that the BPS was understating the inflation rate.



“GDP growth rate is 3.1%, not 4.7%” in fiscal year 2015-16, according to the SPDC report. Former interim prime minister and world-renowned economist Moeen Qureshi is the patron of SPDC, while former finance secretary Saeed Qureshi and former State Bank governor Dr Ishrat Husain are on its board.

While launching the Economic Survey of Pakistan on June 2, Finance Minister Ishaq Dar boasted the GDP grew at the rate of 4.7%, which was the highest in the last eight years. Conversely, the SPDC claims the provisional growth rate was 3.1% -- the lowest rate in seven years.

The SPDC said it was the third consecutive year that the PBS exaggerated the GDP growth rate. In June 2014, the PBS brought down the relatively high growth rate achieved in 2011-12 from 4.4% to 3.8%. “This was done to demonstrate that the GDP growth rate of 4% in 2013-14 was the highest in the last six years,” according to the report.

According to the SPDC estimates, the growth rate in 2015-16 had been overstated in 10 out of the 18 sectors of the economy. “Almost 60% of the overstatement is in the services sector.”



Against the official claim of only 0.2% negative growth in agriculture, the sector actually contracted 2%, it said. Similarly, industry grew at a pace of 5.5% against the government’s claim of 6.8%. Moreover, the SPDC stated that the services sector’s growth was 4.1%, implying a GDP growth rate in 2015-16 of 3.1% against the official claim of 5.7%.

The SPDC underlined that its claim that the economy grew at a pace of only 3.1% was consistent with findings of over last four decades that in a year when the agricultural sector declines, the GDP growth rate never exceeds 4%.

The agriculture sector is important for Pakistan not only because it accounts directly for 21% of GDP but also 60% of the manufacturing is agro-based and over 40% of trading and transport is of agricultural products, said the SPDC.

The think tank noted that electricity generation increased by only 2% and with this little increase in output, the economy cannot grow at the rate of 4.7%.

Finance Minister Dar is increasingly coming under pressure to reform the PBS. He admitted during a recent news conference that there were some legitimate questions about the working of the PBS because nobody ever raised such questions about the working of the Securities and Exchange Commission of Pakistan and State Bank of Pakistan.



Last month, the finance minister had offered to engage international experts to resolve the controversy over calculation of GDP but no meaningful effort has since been made in that direction.

The SPDC also noted that private investment also dropped in the outgoing financial year despite an improvement in the security situation, extraordinarily low interest rates and greater access to credit.  The government has missed the investment target for 2015-16.

It was of the view that Chinese investment is substituting foreign direct investment (FDI) from other countries instead of complementing it. The net flow of FDI remained only $1 billion during the first 10 months of 2015-16 against the annual target of $3.3 billion.

Published in The Express Tribune, June 7^th, 2016.