Reverting to old base year: Economy grows by 3.67% this year, but misses target

Growth is around 1% higher than previous estimate of 2.8%.

ISLAMABAD:

The economy grew by 3.67% this year, missing even the revised growth target despite government’s efforts to keep the economy at a higher level by sticking to the old base year for calculations.

For yet another year, the targets for agriculture, services and large-scale manufacturing were missed while the industrial growth target was achieved. Provisional gross domestic product (GDP), figured out on the basis of 1999-00 as base year, was approved in the 92nd meeting of the National Accounts Committee, headed by Statistics Secretary Sohail Ahmad, here on Tuesday.

Pakistan needs an annual growth of 7% to 8% to create jobs for new entrants in the market. Anything below this benchmark leads to an increase in unemployment and increase in poverty, according to the Planning Commission.

However, there were improvements as compared to the results of last year. In some sectors, the results seemed to be encouraging despite the fact that many industries remained shut due to the energy crisis and investment was not picking up because of political instability, shortage of working capital and security concerns.

The latest estimates are based on provisional information up to nine months, which is used to make projections for the entire year. Net national income grew by Rs213 billion, according to NAC documents.

The 3.67% growth was almost one percentage point higher than the figure approved earlier by NAC in its 91st meeting held on April 26. In this meeting, NAC also revised the calculation methodology and changed the base year from 1999-00 to 2005-06.

However, economic managers did not accept both the rebasing of the economy and 2.8% growth rate with revised base year of 2005-06, compelling the statisticians to go back to drawing boards.

For the current financial year ending June 30, the government had originally set a 4.2% growth target that was revised downward to 4% after last summer floods in Sindh.

NAC also revised last fiscal year’s growth figure, putting it at 3.04% against earlier assessment of 2.4%. “Had there been no revision of last year’s growth, the GDP would have grown by 4.2% this year due to a low base effect,” said Sohail Ahmad while talking to The Express Tribune.

However, the revision of last year’s growth is not unusual as it is a normal practice to revise the figures of the last two years on the basis of final data.

Agriculture

The government missed the 3.4% agricultural growth target as the sector grew by 3.13%. Last year, the growth was 2.4%.

Though the targets for major crops and livestock were achieved, minor crops and fishery targets were missed. Against the target of 3%, major crops rose by 3.2% against 0.3% contraction last year. Minor crops contracted by 1.3% against the growth target of 2%. Last year, minor crops grew by 2.7%.

The 4% growth target for livestock was achieved. Last year too, it grew at almost the same pace.

Industries

The government surpassed the industrial sector growth target of 3.1% as the sector grew by 3.4%. Last year, the growth was only 0.72%. Mining and quarrying sector grew by 4.4%, much more than the target of 1%.

The manufacturing sector grew by 3.5% against the target of 3.7%. Last year, it grew by 3.1%. In the manufacturing sector, large-scale manufacturing rose by 1.78% against a 2% target. The electricity, gas and water supply sector contracted for the third consecutive year and it saw a negative growth of 1.6%. The growth target was 1%.

Services

The government missed the services sector growth target of 5% as the biggest component of the economy grew by 4.1%. However, the decision to keep the old base year helped achieve growth targets in sub-sectors of the services sector.

According to fresh results, finance and insurance sub-sector rose by 6.6% against the target of 0.2%. Last year, the sector had contracted by 1.4%. The rebasing led to an 11% contraction in this sector.

The 4.5% growth target for the transport and communications sector was missed as it grew by 1.3% while wholesale and retail trade grew by 3.6% against the target of 5%. The public administration and defense sector grew by only 2.6% against the target of 6%.

Published in The Express Tribune, May 9^th, 2012.