- GDP projected to have grown at 3.9% as measures help V-shaped recovery
ISLAMABAD: Finance Minister Shaukat Tarin will unveil Economic Survey 2020-21 on Thursday (June 10), claiming a projected GDP growth of 3.9 per cent and Rs4,170 billion revenue collection (July-May 2021), the highest ever in the country’s history as major achievements of the outgoing fiscal year.
There was a notable pickup in economic activity with easing of restrictions, large-scale manufacturing (LSM) gained traction, demand indicators started showing encouraging growth, and all major Kharif crops, except cotton, exceeded their respective production targets. The services sector also showed buoyancy, fiscal and external sector exhibited marked improvement as current and primary account deficits turned into surpluses and the trend continued until the end of the third quarter.
Initially, the market-determined exchange rate touched a low in August 2020. However, since then the rupee began strengthening and appreciated by 9.5 percent by end-April 2021. However, inflation, measured through CPI, remained high and food prices continued their upward trajectory.
From stabilization to accommodative fiscal and monetary policy measures helped in mitigating the economic fallout of the Covid19 shock and laid the foundation of a V-shaped recovery. At a time when the developing world is grappled with rising debt, Pakistan’s external debt recorded its slowest build-up of the last five years.
According to the economic survey, agriculture sector comfortably achieved its growth target; however, its growth performance was slower than last year as it grew by 2.8 percent in the current year against 3.3 percent in 2019-20. Its main sub-sectors depicted mixed patterns in growth. Within agriculture, the crop sector (comprising of important crops, other crops & cotton ginned) performance registered average growth of 0.6 percent during 2013-18.
During 2020-21, the crop sector posted a growth of 2.5 percent which was lower than 5.5 percent growth achieved during 2019-20, mainly due to the decline in cotton output. Important crops and livestock improved in performance, however cotton ginning dragged growth downwards. Important crops depicted 4.7 percent growth due to an increase in production of wheat, rice and maize to reach their highest level in the country’s history. The cotton crop succumbed to unfavorable weather, low water availability, and pest attacks. The decline in cotton production has therefore undermined the crop sector performance in 2020-21. Value added in livestock sector grew by 3.1 percent.
A senior official told this correspondent that according to the estimates of Ministry of National Food Security and Research, wheat production will be 26 million tons in 2021 but the government took the figure of Suparco whose estimate is 27 million tons to show better GDP growth.
The performance of other crops comprising minor crops like vegetables, fruits, condiments, oil seeds etc. during 2020-21 posted modest growth of 1.4 percent as compared to last year (8.4%). Healthy growth of vegetables, fruits, green fodder and oil seeds helped other crops sub-sector to almost attain the target of 1.5 percent.
The structural problems and composition of the agriculture sector is constraining growth of the sector at around or below 4 percent even when crop production is considered good.
Manufacturing sector recorded a high growth of 8.7 percent as against contraction of 7.4 percent last year, with high increase of 9.3 percent in large-scale manufacturing (LSM) that led the overall growth of the manufacturing sector. Covid-19 pandemic particularly intensified economic woes of the industrial sector which depicted major contraction last year. LSM growth remained predominantly negative last year because of Covid related lockdown severely damaging its recovery. Government’s effective handling and stimulus packages helped the sector to revive and post healthy growth. Automobiles with the help of rising demand topped the list with 23.4% growth, followed by food & beverages (11.7%), petroleum & coke group (12.7%) and pharmaceuticals (12.6%) while electronics, engineering products and leather witnessed contraction by 20.8%, 25.5% and 38.3%, respectively. LSM grew by 9.3% based on July-March 2020-21 versus contraction of 5.1 percent in same period of last year.
Services sector was worst affected by the Covid last year owing to falling tourism revenues, lower mobility in the transport sector (air, rail, ships and road), lockdown inflicted complete cessation of trading activities, closure of education institutions, event management and community services, and major burden on financial sector because of falling interest rates and business financing. Some services grew due to Covid 19 including health services, CSO operations and online digital content and online product delivery.
With the easing of restrictions on mobility, overall services sector revived to almost pre- pandemic levels barring transport sub-sector. Overall, services sector posted 4.4 percent growth as against rare contraction of 0.5 percent last year, which provided major impetus to economic growth revival in 2020-21. It’s largest sub-sector - wholesale and retail trade (WRT) - posted 8.4 percent growth from last year’s contraction of 3.9 percent. Financial & Insurance services also posted healthy growth of 7.8 percent with a significant improvement on modest growth of 1.1 percent in 2019-20.
Transport related services posted marginal negative growth of 0.6 percent mainly because of Covid related restrictions on air and road passenger traffic.
The investment-to-GDP ratio declined slightly from 15.3 percent of GDP in 2019-20 to 15.2 percent in 2020-21. Foreign direct investment (FDI) contributed to this downslide. Fixed investment increased by 5.8 percent in real terms and 13.8 percent in nominal terms. Private sector investment increased by 6.5 percent, notwithstanding fall in FDI owing to global pandemic driven uncertain environment. However, in real terms, private investment contracted marginally by 1.3 percent and that was driven by 68 percent fall in real terms in investment related to electricity & gas distribution sector.
Copyright Business Recorder, 2021