The economy has sprung a surprise, growing nearly 4% in the outgoing fiscal year on the back of a healthy momentum in all main sectors. The unexpected economic activity beats expectations of the government and the international financial institutions by a wide margin.
The provisional Gross Domestic Product (GDP) growth rate of 3.94% is almost double than the official target of 2.1%. But it was a surprise even for the State Bank of Pakistan and the Ministry of Finance which initially termed the figure unrealistically high during a meeting convened to approve the growth figure.
The 4% growth rate was higher than the SBP’s estimates of 3% and the IMF’s projection of 2% for this fiscal year. The World Bank, too, had predicted a GDP growth rate of no more than 1.5%.
The 103rd meeting of the National Accounts Committee (NAC) approved provisional estimates of 3.94% of the GDP, announced the Ministry of Planning and Development after the meeting. Planning Secretary Hamid Yaqoob Sheikh chaired the NAC meeting –a body having representation of all the stakeholders.
In the last fiscal year, the economy had contracted to 0.5%.
The agriculture sector maintained its last year growth rate of 2.8% but the industrial and services sectors surpassed the annual targets with wide margins amid shocks to business activities from the third wave of the Covid-19.
“The per capita income in dollar terms has increased by 13.4% from $1,361 a year ago to $1,543 in 2020-21 due to strengthening of the rupee,” tweeted Minister for Planning Asad Umar after the meeting.
He said the size of the economy also increased from $263 billion last year to $296 billion this year, implying an increase of $33 billion in a single year which is the highest ever.
At the end of the PML-N tenure, the economic growth rate was 5.5% and the size of the economy in dollar terms was $313 billion – a figure that the PTI could not touch even after three years.
Sources told The Express Tribune that earlier representatives of the Ministry of Finance Dr Imtiaz Ahmed and the SBP chief economic Dr Mohammad Ali raised objections to the Pakistan Bureau of Statistics’ (PBS) provisional growth figure of 3.94% at the Friday meeting.
They said the SBP was of the view that according to its macroeconomic modeling, the growth was around 3%.
The Ministry of Finance representative stated that the 13.8% growth in the gross fixed capital formation was not sufficient to support the 4% economic growth rate.
They said the Ministry of Finance also raised the question about the impact of foreign remittances on consumption and investments.
Due to disagreement, the meeting ended inconclusively and was reconvened again after two hours. But during the break, the Ministry of Finance representative received instructions from the top bosses to withdraw objections, said the sources.
Planning Commission spokesperson Zafarul Hasan Almas told The Express Tribune that the SBP’s objections were more related to a set of agriculture production data.
The 27.3 million tons wheat production figure that the NAC approved was higher than 26.04 m metric tons approved by the Federal Committee on Agriculture.
The sources said a non-elected cabinet member had asked the PBS this week to show a growth rate of over 4%. The PBS representative had initially resisted that the growth rate would be less than 3.5%. However, eventually the 4% economic growth rate was presented before the NAC on Friday.
The NAC slightly downward revised the economic growth figure for the last fiscal year 2019-20 to negative 0.5% and for the first year of the PTI government the figure was adjusted upward to 2.1%.
The GDP at current market prices has also been computed at Rs47.7 trillion for 2020-21. This shows a growth of 14.8% over Rs41.6 trillion for 2019-20, said the Ministry of Planning.
In rupee terms, the per capita income for 2020-21 has been calculated as Rs246,414, showing a growth of 14.6% over Rs215,060 during 2019-20.
About 69% of the growth came from the services sector and its share in the total size of the economy has increased to 61.5%. The agricultural sector’s weight in the GDP has further reduced to 18.7%. The industrial sector’s weight in the size of the economy was 20.58% but it has slipped to 19.9%.
The electricity generation and gas distribution has contracted by 23% as against the growth target of 1.4% set for the outgoing fiscal year. Finance Minister Shaukat Tarin will formally announce a provisional growth rate of 3.94% on June 10 with the release of the Economic Survey of Pakistan 2020-21.
The agricultural sector grew this time by 2.8%, which was not only at last year’s level but also equal to the growth target. The production of major crops increased 4.7% -- far higher than the target.
The other crops showed a growth of 1.4% which is slightly lower than the target.
Cotton ginning contracted by 15.6%. The livestock sector grew by 3.1% -- below the target -- and the forestry sector grew by 1.4%, which was also less than the target. The fishing sector grew by only 0.7% against the 1.5% target.
Cotton production declined 23% to just little over 7 million bales. The production of rice increased by 13.6% to 8.4 million metric tons and the sugarcane production jumped 22% to 81 million metric tons. The output of wheat grew by 8% to 27.2 million metric tons. The production of maize showed a growth of nearly 1% to 8.5 million metric tons.
“Pakistan successfully managed Covid shock and strikes a balance between life and livelihood,” said Federal Minister for Information Fawad Chaudhry. The minister said the government’s package of growth of agriculture and price inducement worked very well.
The country will be food secure and self-sufficient in wheat and the farmer’s prosperity will further trigger economic activity which will enhance prospects of growth next year, said Fawad.
The industrial sector has performed exceptionally well despite the Covid-19 situation and a partial containment of the economic activities. The government achieved many of the sectoral targets.
Against a target of just 0.1%, the output in the industrial sector stood at 3.6%.The output of large-scale manufacturing grew by 9.3% in this fiscal year while small-scale manufacturing grew 8.3%.
The slaughtering sub-sector grew at a pace of 3.9% but electricity generation and distribution contracted by 23% and mining and quarrying sub-sector registered a negative growth of 6.5% for the consecutive second year. The construction sector also posted a growth of 8.3% while surpassing the target of 3.5%.
The main surprise came from the services sector, which showed a growth of 4.43% against the target of 2.6%. The sector has been hit by the Covid-19 related restrictions.
The wholesale and retail trade sector posted 8.4% growth against the target of 1.1%. The transport, storage, and communication sub-sector saw a minor contraction of 0.6%.
The finance and insurance sector grew by 7.8%, housing services grew 4.1%, general government services by 2.2% and other private services grew by 4.6%, according to the NAC.