Growth – under par – again

For a country that needs about 7 percent of growth in national output each year to absorb the annual increases in labour supply, Pakistan will have posted a poor performance in the fiscal year ending June 2013.
It will grow only 3.6 percent, according to the latest released Economic Survey 2012-13, quite lower than the initial target of 4.3 percent. This less-than-targeted performance is due to lower growth in farming and services sectors. The former is estimated to settle at 3.3 percent as against a target of 4 percent, whereas the latter will have grown by 3.7 percent compared to the target of 4.3 percent.
What saved the day was an unexpected growth in industrial sector. The biggest component of the industrial sector, the large scale manufacturing unit, grew by 2.8 percent against a target of 2 percent – despite energy sector shortages.
The other major contribution to industrial growth came from 7.6 percent growth in mining and quarrying sub-group, possibly its highest growth since re-basing of national accounts. The last time this sector saw such growth was in 2006-07, when it grew by 7.3 percent.
In terms of composition of GDP growth, consumption continued to drive the bulk of output, whereas contribution from total investments remained on the fringes. Investments have been hit hard by a slew of internal and external factors, not least of which include the security situation and the energy crisis.
Fixed investment as a percentage of GDP fell to 12.6 percent from 17.6 percent five years ago, where private sector investment (as % of GDP) will have stood at 8.7 percent in FY13; its lowest in recent memory.
The PML-N government has planned to increase fixed investment to 13.5 of GDP next fiscal year, with private investment targeted at 9.1 percent. Its end-of-the-term target is to take fixed investment to 20 percent.
With increased investments, the government hopes to achieve a GDP growth of 4.4 percent next year — eyeing 3.8 percent growth in farming, 4.8 percent in industry and 4.6 percent in the services sector.
It’s too early to say whether these targets will be achieved, given the gargantuan nature of obstacles to GDP growth. But even if these targets are achieved, substantial portions of next year’s incremental labour supply will be left unemployed. That should be one of the biggest worries for the country’s new managers.

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Sectoral point contribution to GDP growth

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Agriculture: Key items             0.7062

Crops                              0.2784

Livestock                          0.4403

Industrial: Key items              0.7315

Mining and Quarrying               0.2356

Manufacturing                       0.462

LSM                                0.2968

Services: Key items                2.1349

Wholesale & Retail                  0.455

Transport, Storage & Communication 0.4658

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