3.7% growth surpasses projections

NAC okays figure against estimates submitted to IMF; agriculture outperforms

ISLAMABAD:

The government on Tuesday approved a 3.7% economic growth rate for the first quarter of the current fiscal year on the back of growth across all major sectors of the economy, beating its own official reports of severe damage to agriculture caused by the "devastating floods".

The National Accounts Committee (NAC), the government body mandated to approve economic growth numbers, approved the overall 3.71% gross value addition for the first quarter of 2025-26. The NAC meeting was chaired by Secretary Planning Awais Manzur Sumra.

However, the output figures across various sectors appear surprising, with some even contradicting the government's own reports and data shared with the International Monetary Fund (IMF) following the summer floods.

According to the NAC, electricity and gas output grew by more than 25%, the construction sector also expanded by over 21%, while rice production exceeded even the pre-flood official estimates.

Details presented to the committee showed that despite floods and a 3.6% reduction in cultivated area, rice production increased by 2.5% to nearly 10 million tonnes. In contrast, a Ministry of Planning report shared with the IMF had stated that the rice crop was badly damaged by floods and projected production in the range of 8.3 million tonnes to 8.9 million tonnes for the year.

The Planning Commission had estimated that the floods caused direct and indirect losses of Rs744 billion, with the agriculture sector bearing the bulk of the damage. For the current fiscal year, the government had initially set an economic growth target of 4.2%, which was later revised down to 3.5% after summer floods in three major rivers inundated large parts of Punjab. Despite this, the NAC on Tuesday approved sector-wise growth rates of 2.9% for agriculture, 9.4% for industry and 2.4% for services for the July-September quarter.

The approval came weeks after the governor of the State Bank of Pakistan (SBP) said that the current economic growth model could not sustain a population of 250 million. Separately, the national coordinator of the Special Investment Facilitation Council (SIFC) had said that Pakistan did not have any growth plan.

Due to controversy over last year's reported 2.7% economic growth rate, Finance Minister Muhammad Aurangzeb had offered to commission an independent investigation of the growth numbers.

He had also offered to review the figures and include the media in the deliberations. However, no such meetings were subsequently held, and the government later revised the previous fiscal year's growth rate to over 3%.

Agriculture

The NAC reported that important crops recorded a decline of less than 1% in the first quarter, mainly due to a 1.2% reduction in cotton production. However, higher growth was recorded in maize, rice and sugarcane.

It stated that other crops have witnessed a negative growth of 6.4% in the first quarter. Livestock output increased by 6.3%, forestry output rose by 2.1%, while the fishing sector recorded growth of nearly 1% during the period.

Industry

There were also many surprises in the industrial sector, where growth jumped to 9.4% in the first quarter. The approved growth figure suggests that either the industrialists had understated the pace of growth or whether the reported number overstated actual performance.

The NAC approved a 25.5% growth rate for the electricity, gas and water supply sector, attributing the increase to higher output from WAPDA and power distribution companies. It noted that the electricity sub-sector grew because of an increase in quarterly subsidies from Rs20 billion to Rs118 billion.

The construction industry has been shown to have grown by 21%, while cement production increased by 15.3%. This was notable given that the real estate sector remains among the most affected segments of the economy.

Services

The services sector has shown a growth of 2.4% in the first quarter, according to the NAC. Wholesale and retail trade expanded by 3.1%, supported by growth in agriculture and manufacturing, it added.

However, the information and communication sector registered a sharp contraction of 28.7% during the quarter, a figure questioned by some NAC members.

They were of the view that the information technology exports had increased in the first quarter, thus, the sector's output should have not decreased nearly 29%.

The Pakistan Bureau of Statistics (PBS) informed the meeting that the information technology sector contracted due to reduced output by mobile companies. The finance and insurance sector grew by 10.4% in the first quarter.

Public administration and social security, commonly referred to as general government, expanded by 8.1%. Education services posted growth of 5.24% due to updated data from private sector sources, the NAC noted.

2024-25

The NAC also slightly upward adjusted the annual growth rate for the previous fiscal year to 3.09%. It further raised growth estimates for the electricity, gas and water sector to over 29%, citing increased output from independent power producers (IPPs) and the gas sector. A decline in output from distribution companies was observed but was offset by higher output from IPPs and the gas sector, it added.