World Bank’s latest report spelled out a bunch of good news for Pakistan. It indicated that Pakistan’s real GDP growth rate is amongst the highest in the world. It also echoed this column’s sentiment that Pakistan’s balance of trade is an essential evil given the scale of CPEC and its accompanying imports.
Underlining the continuing trend of robust domestic demand with strong credit growth and up tick in investment due to CPEC, it painted a picture of Pakistan emerging as one of the top performers amongst emerging markets and developing economies. Though industrial production is depicted as somewhat erratic, inflation is roughly stable, credit to the private sector has more than doubled and exports are recovering in recent months.
While there are some pats on the back to be doled out, the report forecasts also indicate that India and Bangladesh are likely to outstrip Pakistan’s growth rate. Despite CPEC, it is India that is amongst the leading countries in Asia for attracting foreign investment due to its policy efforts. Growth in remittance inflows for Pakistan was the lowest in the region.
Historic challenges such as fiscal slippages to weak tax revenues and upcoming elections remain. Despite progress, the rate of non-performing loan ratios remain high at around 10 percent. Increasing contingent liabilities due to infrastructure projects is among the risks identified in the report. The increasing current account deficit is problem faced by India and Bangladesh as well since it is symphonic of growing economies.
The last fiscal year saw a growth rate of 5.3 percent which was somewhat below the government’s target of 5.7 percent due to relatively sluggish industrial growth than expected. Strong activity in construction and services and recovery in agricultural production helped support the growth rate.
In essence the report told us what we know: Pakistan is growing, CPEC is a factor, and the traditional problems such as current account deficit, non-performing loans and a narrow tax base continue.
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