Govt projects Pakistan economy to grow at 3.94% in FY21

KARACHI: Projecting to beat estimates of both the State Bank of Pakistan (SBP) and the International Monetary Fund (IMF), the National Accounts Committee estimated Pakistan’s economy to grow by 3.94% for the ongoing fiscal year.

The estimate, if met, will allow breathing space to Pakistan’s economic policymakers who have been grappling with a pandemic-induced contraction in Pakistan’s Gross Domestic Product (GDP) last year - the first in several decades.

Pakistan's provisional GDP was estimated at 3.94 percent for the year 2020-21 during the 103rd meeting of the National Accounts Committee, held under the chairmanship of Secretary Ministry of Planning, Development and Special Initiatives.

This improvement in the country’s GDP was attributed to positive growth in the agriculture, industrial and services sector, which witnessed positive growth at 2.77%, 3.57% and 4.43%, respectively.

Minister for Energy Hammad Azhar also referred to these new estimates as “a remarkable recovery”, claiming that unlike past growth trends, this one was led by the industry. He also emphasised that growth in GDP was also accompanied by an increase in foreign exchange reserves and a current account surplus.

This year witnessed the highest level of wheat, rice and maize production, as well as the second-highest level of sugarcane production. Other crops also showed positive growth of around 1.41%, along with 3.1% growth in the livestock sector and 1.4% in forestry.

While cotton production fell by 22.8%, the growth of other important crops was estimated at around 4.65% as a whole in the recent press release by the National Accounts Committee.

Furthermore, the industrial sector also played its part in the positive GDP projection. The large-scale manufacturing sector in Pakistan also showed an unprecedented healthy growth rate of 9.29%, with textiles, food beverages and tobacco, petroleum, pharmaceuticals, chemicals, non-metallic minerals, automobiles and fertilizers emerging as major contributors in this sector.

While the COVID-19 pandemic impacted lives and livelihoods all across the globe, the services sector suffered a great deal with businesses that required in-person contact shutting down as the virus continued to spread. Nonetheless, the services sector in Pakistan fared well with a great deal of focus towards increasing broadband penetration and digitization in the country.

According to the National Accounts Committee’s estimates, the wholesale and retail sector in Pakistan grew by 8.37% due to a marketable surplus this year. Although transport, storage and communication declined by 0.61%, they were offset by growth in other sub-sectors like finance and insurance, which showed an estimated increase of 7.84%.

While stakeholders rejoice at this positive growth in Pakistan’s GDP projections, it is important to analyse whether these recent figures are overestimations or actual predictions, indicative of Pakistan’s success in overcoming COVID-19 challenges.

On the other hand, the IMF also predicted a stronger economic recovery for Pakistan in 2021 as the vaccination roll-out gained momentum. However, it projected GDP growth at 1.5% in 2021, far below the National Accounts Committee’s estimates.

Similarly, SBP also predicted improvements in the country’s growth outlook and estimated that the national GDP would grow between 1.5 to 2.5% in fiscal year 2021 as compared to a 0.4% contraction last year.