Last three years' growth lowest in three decades

Pakistan's 3-year (FY09-11) average economic growth during the incumbent PPP-led government stood lowest in last 3-decade at 2.6 percent. During the same period developing Asian countries grew by 8.4 per cent with India, Sri Lanka and Bangladesh showing a growth of 7.7 per cent, 6.6 per cent and 6.0 per cent, respectively.
"The energy crisis stemming from exogenous factors and structural weaknesses along with security challenges have continued to restrict Pakistan's economic growth in last 3-years," Nauman Khan, an analyst at Topline Securities said.
In FY11, he said, the fragile economy of the country was hit hard by catastrophic floods. The floods wiped out about 2 per cent from the economic growth while inflicted a massive damage of $10 billion on economic infrastructure. Resultantly, GDP grew by a meager 2.4 percent in FY11. The recent Economic Survey 2010-11 has adjusted previous two years (FY09-10) growth rate to 1.7 per cent and 3.8 per cent, from 1.2 per cent and 4.1 percent, respectively. Furthermore, per capita income in dollar terms has improved by 16.9 per cent to stand at $1,254 in FY11 as against $1,073 in FY10.
About the major highlights of the Economic Survey 2010-2011, he said that the onus of growth in FY11 was primarily on services sector showing an increase of 4.1 per cent, while the performance of the other two sectors (agriculture and manufacturing) were marred by impact of devastating floods and acute energy shortage.
The devastating floods restricted the agricultural growth to a meager 1.2 per cent, while severe energy shortage and cut in public sector expenditure were the major factors behind a restricted growth of 3.0 per cent in the manufacturing sector. On the agricultural front, major culprit behind the dismal performance was decline in major crops (4 per cent) which contributes 31.1 per cent of the said sector, he added. Within the major crops cotton and rice were hardly hit by floods, as these two witnessed a decline of 11.3 per cent and 29.9 per cent, respectively in FY11.
As per the latest available numbers, Large Scale Manufacturing (LSM) increased by 1.71 per cent mainly caused by improvement in the sub-groups of food and beverages (9.3 per cent), leather (30 per cent) and automobile (14.6 per cent). The positive impact of these was partially diluted by negative growth in petroleum group, down 4.2 per cent.
Furthermore, national saving as a percentage of GDP slightly improved to 13.8 per cent as against 13.1 per cent last year, while total investment dropped significantly to 13.4 per cent versus 15.4 per cent of GDP last year. Heightened security concerns, cut in the public sector spending and acute energy shortage were the major factors deterring investments. "After the floods fiscal deficit target was upwards revised to 5.3 per cent of GDP but we believe the actual deficit would balloon to 6.5 per cent, despite recently taken austerity and taxation measures," he said.
According to the survey, he said, CPI inflation is estimated to be 14.1 per cent in FY11. However, with recent decline in the international oil prices along with high base effect, average inflation is expected to remain below 14 per cent, he opined. Some thing to cheer about in FY11 was burgeoning remittance (up 24 per cent in FY10-11) and higher exports (up 28 per cent in 1FY10-11), which has rendered into favourable current account surplus of $780 million in FY10-11. Overall, current account is expected to stand at surplus 0.35 per cent of GDP after seven years.