Economic turnaround?

Editorial May 17, 2010

The economy has been in the doldrums since early 2008. So when the government makes a drastic upward revision in the provisional estimates for GDP growth, one is tempted to view that as good news. Yet there may be some cause for tempering one’s optimism in this case. For one thing, it appears that the upward revision of growth figures is in part due to the downward revision of last year’s GDP figures. While some economists have pointed to this as a sign of government malfeasance in national accounting, we feel compelled to point out that GDP figures in nearly all countries are revised repeatedly. In the United States wide radiations between the initial and final estimates for GDP Growth are quite common. In fact, the direction of the revision is often viewed as a leading indicator of the direction of overall economic growth. If one applies that logic to the case of Pakistan, this suggests that the upward revision this year may be a reflection of an economic turnaround.

The details of the figures are somewhat interesting. Agriculture, despite a doubling of the wheat support price, looks set to miss its growth target of 3.8 per cent, likely growing by a more miserly 2.2 per cent. There are economists who argue that this is a demonstration that the government’s attempts to stimulate the rural economy have not been met with success. It is probably advisable for the government to rethink its strategy for rural development.

Perhaps the most encouraging element of the report was that manufacturing grew faster than expected. If the earnings announcements of manufacturing firms are anything to go by, this figure seems quite believable. Yet further growth is likely to be constrained by the chronic power shortage, which is perhaps the single most glaring economic failure of this administration. Rather than trotting out ministers every week, perhaps the government should focus on getting the job done first.

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Nadir El Edroos | 10 years ago | Reply I would love to share your optimism but GDP figures measure past performances and with inflation continuing to hover in the 12%-14% range any upward swing in GDP will quickly be cancelled out by increasing inflation. Manufacturing sector may have grown, however the sustainability of that growth is debatable given increasing raw material costs, power disruptions and questions marks over the strength of external demand. Even so, the manufacturing still represents a smaller part of our nations real output so any increase will translate into gains for the few. Perhaps most importantly, increasing growth in the US; India and China's success in weathering the recession will place greater pressure on an increase in commodity, importantly oil prices. Any improvement in GDP growth will lie vulnerable to any increases in global oil prices which will fuel another cycle of high inflation.
Meekal Ahmed | 10 years ago | Reply The constraint on economic growth of power shortages is not the fault of this government. It goes far back in time. The average gestation of a new power project of reasonable size, which would make an impact, is at least five years. The short-term solution of rental power projects was not a bad one in principle; but they screwed that up. That is something they should take full responsibility for.
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