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The Economic Outlook | Malik M Ashraf

The growth targets set by the government for various sectors of the economy may have been missed as revealed in the Economic Survey for 2014-15, but the fact remains that the economy as a whole has fared well as compared to the previous year. The targets fixed by the governments are actually perceived projections firmed up on the basis of myriad of variables. Any unforeseen changes in those variables on the domestic and international level can have profound impact on the fixed targets. So while evaluating the performance of any economy and its different components it is imperative to give due consideration to all those factors.

According to Finance Minister Ishaq Dar the GDP target of 5.1 per cent was fixed on the assumption of higher agricultural production, improvement of energy supplies and better investment prospects but the economy grew at 4.24 per cent. However it was higher than 4.03 per cent growth recorded last year. The agriculture sector grew at 2.9% against the target of 3.3%, Industry grew by 3.6 % far below the set target of 6.8 percent while the services sector performed well by achieving a growth rate of 5.0 percent against the target of 5.2 per cent. The fiscal deficit stands at 5% per cent as compared to 5.5% last year. It is pertinent to mention that the fiscal deficit stood at 8.5% when the PML (N) government was installed. Fiscal deficit is considered to be the mother of all economic ills and reducing it by 3% in two years time is not a mean achievement by any standard, rather it is a commendable effort.

The per capita income increased by a significant margin of 9.25% as compared to fiscal year 2013-14 which according to the minister was attributable to increase in GDP growth , lower rate of growth in population and stable Pakistani rupee. Interest rates were revised downwards to 7%, the lowest in the last 42 years and inflation restricted to merely 4.8%. Foreignexchange reserves more than doubled since the beginning of 2014 and stand at around $17.7 billion. The most important thing is that no sector of the economy showed negative growth. The economy is showing signs of recovery and this has been corroborated and endorsed by the international lending institutions as well as the rating agencies.

The targets fixed by the government could not be achieved because the assumptions of higher agricultural growth, improvement in energy supplies and better investment prospects did not materialize as expected. And it is really hard to context the claim of the Finance Minister that these projections failed to crystallize into reality due to sit-ins in Islamabad which almost lasted for five month and badly affected the economy, continued energy crisis for the obvious reasons and an unexpected factor of decrease in international petroleum prices.

Another very cogent and strong factor was financing the operation Zarb-e-Azab which was a significant drain on the resources required for developmental purposes. Yet another factor that badly hamstrung the growth process and was responsible for lower percentage of growth in the agriculture sector were the floods which not only damaged crops on millions of acres but also forced the government to divert resources for relief and rehabilitation of the people affected by them and also rebuilding the damaged infrastructure. These were some of the factors beyond the control of the government.

The claims made by the minister in regards to future growth and health of the economy surely cannot be dismissed as a rhetoric or wishful thinking owing to a number of positive and credible initiatives taken by the government in regards toresolving political crisis, improving security and and order situation in the country and revitalizing the economy.

The sit-ins are over and political issues have been resolved through an unprecedented spirit of accommodation and tolerance. Operation Zarb-e-Azab and targeted operation in Karachi have produced remarkable results and the way has been paved for a decisive action against the supporters and abettors of terrorism in the Urban centers. These developments coupled with the lucrative incentives announced by the government for foreign investors would surely enhance the chances of direct foreign investments in Pakistan.

— The writer is freelance columnist based in Islamabad. The growth targets set by the government for various sectors of the economy may have been missed as revealed in the Economic Survey for 2014-15, but the fact remains that the economy as a whole has fared well as compared to the previous year. The targets fixed by the governments are actually perceived projections firmed up on the basis of myriad of variables. Any unforeseen changes in those variables on the domestic and international level can have profound impact on the fixed targets. So while evaluating the performance of any economy and its different components it is imperative to give due consideration to all those factors.

According to Finance Minister Ishaq Dar the GDP target of 5.1 per cent was fixed on the assumption of higher agricultural production, improvement of energy supplies and better investment prospects but the economy grew at 4.24 per cent. However it was higher than 4.03 per cent growth recorded last year. The agriculture sector grew at 2.9% against the target of 3.3%, Industry grew by 3.6 % far below the set target of 6.8 percent while the services sector performed well by achieving a growth rate of 5.0 percent against the target of 5.2 per cent. The fiscal deficit stands at 5% per cent as compared to 5.5% last year. It is pertinent to mention that the fiscal deficit stood at 8.5% when the PML (N) government was installed. Fiscal deficit is considered to be the mother of all economic ills and reducing it by 3% in two years time is not a mean achievement by any standard, rather it is a commendable effort.

The per capita income increased by a significant margin of 9.25% as compared to fiscal year 2013-14 which according to the minister was attributable to increase in GDP growth , lower rate of growth in population and stable Pakistani rupee. Interest rates were revised downwards to 7%, the lowest in the last 42 years and inflation restricted to merely 4.8%. Foreignexchange reserves more than doubled since the beginning of 2014 and stand at around $17.7 billion. The most important thing is that no sector of the economy showed negative growth. The economy is showing signs of recovery and this has been corroborated and endorsed by the international lending institutions as well as the rating agencies.

The targets fixed by the government could not be achieved because the assumptions of higher agricultural growth, improvement in energy supplies and better investment prospects did not materialize as expected. And it is really hard to context the claim of the Finance Minister that these projections failed to crystallize into reality due to sit-ins in Islamabad which almost lasted for five month and badly affected the economy, continued energy crisis for the obvious reasons and an unexpected factor of decrease in international petroleum prices.

Another very cogent and strong factor was financing the operation Zarb-e-Azab which was a significant drain on the resources required for developmental purposes. Yet another factor that badly hamstrung the growth process and was responsible for lower percentage of growth in the agriculture sector were the floods which not only damaged crops on millions of acres but also forced the government to divert resources for relief and rehabilitation of the people affected by them and also rebuilding the damaged infrastructure. These were some of the factors beyond the control of the government.

The claims made by the minister in regards to future growth and health of the economy surely cannot be dismissed as a rhetoric or wishful thinking owing to a number of positive and credible initiatives taken by the government in regards toresolving political crisis, improving security and and order situation in the country and revitalizing the economy.

The sit-ins are over and political issues have been resolved through an unprecedented spirit of accommodation and tolerance. Operation Zarb-e-Azab and targeted operation in Karachi have produced remarkable results and the way has been paved for a decisive action against the supporters and abettors of terrorism in the Urban centers. These developments coupled with the lucrative incentives announced by the government for foreign investors would surely enhance the chances of direct foreign investments in Pakistan.

— The writer is freelance columnist based in Islamabad.

The Economic Outlook | Malik M Ashraf

Source: http://pakobserver.net/detailnews.asp?id=266008

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