It’s indeed a turnaround if the government estimate of the growth rate for the ongoing fiscal year is correct. The figure, 3.94%, presented by the National Accounts Committee (NAC) has taken all by surprise given that it had been minus 0.47 (revised down from minus 0.38) during the previous fiscal year and was unlikely to rise to this level — that too during a period when the country remains under a lockdown, of some kind, due to the raging coronavirus pandemic. No economic experts or financial institutions had expected Pakistan’s economy to recover like that. The World Bank and the IMF had projected our economy to grow by 1.3% and 1.5% respectively. Our own central bank, the SBP, had estimated a 3% growth while the finance ministry had been even more cautious in its projections.
The opposition has rejected the provisional growth estimate as lies, insisting that the PTI government had similarly projected the growth rate for FY19 to be 3.2%, but it actually turned out to be 1.9%. The experts too are divided in their take on the matter. While some do side with the government with their own set of reasons to justify the possibility of such a “rebound”, there are others who call it “out of question”, “illogical” and “baseless”.
According to experts in the first category, all the three sectors of the economy — the services sector, industry and agriculture — had been showing progress contentiously for the last couple of months, and the figures have not risen all of a sudden. Within the services sector, the highest growth is said to have come from wholesale and retail trade, while within the industrial sector, the large-scale manufacturing is estimated to have grown by 9%. And since these two sub-sectors have a combined share of 28% in the GDP, the overall growth projection of 3.94% is no surprise, if the low-base effect is also taken into account. Such experts also cite “bumper” crops of wheat, rice, maize and sugar cane as well as an unusual activity in the construction sector as growth stimuli.
Experts in the second category, those who are skeptical of the official growth figure, don’t see any grounds for such a “turnaround”. To them, the wholesale and retail trade cannot grow to the cited level given that the markets and bazaars across the country have mostly remained closed due to the coronavirus pandemic. The cut in the volume of the cotton crop, by half, is one more reason for them to question the government estimate. Besides, the NAC’s own figure of a 23% fall year on year in power and gas generation is kind of contradictory. One does wonder how there could be growth in the agriculture, industry and large-scale manufacturing when the energy output if declining.
The SBP has, however, thrown its weight behind the government. In a tweet yesterday, the central bank expressed its complete satisfaction over the new estimate of growth for FY21, insisting that a well-calibrated policy response led to the “rebound” in the economic growth. “SBP provided a targeted economic stimulus of Rs2 trillion to support the recovery through interest rate cut, principal deferment & loan restructuring, Rozgar payroll finance scheme to prevent layoffs, and concessional finance for investment in industry and health facilities,” it added.
Whether or not the figures truly reflect the economic situation in the country will only known after the ongoing fiscal year ends. For now though, the government at least deserves praise for taking steps that are reflective of its seriousness to straighten the economy affected by Covid-19 as well as some of its own policies.
Published in The Express Tribune, May 26th, 2021.