GDP to grow by a healthy 4pc during fiscal 2021


In a recent forecast by the government of Pakistan, the GDP growth is expected to be much higher than the expectations and the calculations by the World Bank and IMF. The World Bank projected that Pakistan’s economy would grow by 1.3% in 2020-21. The IMF predicted 1.5% growth, whereas the State Bank of Pakistan (SBP) estimated 3%. But official (provisional) estimate of nearly 4% GDP growth exceeded all expectations.

On the 22nd of May, the National Accounts Committee (NAC) released the estimate of 3.94 percent GDP growth projections for Fiscal Year 2021, higher than the previous estimates given by ADB and other IFIs. Even Pakistan’s own SBP did not expect the GDP growth rate to be this high.

The NAC report was received by some quarters but in response, the State Bank of Pakistan (SBP) on 24th May released its own data in support of the National Accounts Committee. The SBP released a statement saying, “The estimate released (by NAC) was approved unanimously and has the full backing of the SBP.”

On a Twitter thread on 24th May, the SBP said, “FY21 growth is expected to rise to 3.94pc, as post-Covid recovery underway since last summer has strengthened. The 9-mth current account is also in surplus for the 1st time in 17 years and FX reserves at a 4 yr high.

The Central Bank added, “This rebound was fueled by a well-calibrated policy res­ponse. Given high public debt, fiscal support was targeted to the most vulnerable, notably through the globally acclaimed Ehsaas program. At the same time, public debt and deficit were kept under check which has supported market sentiment, investment outlook, and economic recovery.”

The State Bank further said, “SBP provided a targeted economic stimulus of Rs2 trillion to support the recovery through an interest rate cut, principal deferment & loan restructuring, Rozgar payroll finance scheme to prevent layoffs, and concessional finance for investment in industry and health facilities.”

It may be added here that the GDP for FY20 was a negative 0.47 percent, depicting a shrinkage in the Pakistani economy due to the pandemic.

The services sector grew by 4.4%, industrial sector by 3.5% and agriculture 2.7%. Within services, the highest growth came from wholesale and retail trade, whereas within the industrial sector, it was the large-scale manufacturing that grew by 9%. Considering that these two sub-sectors together constitute 28% of the GDP and both suffered a serious contraction last year, these growth estimates are hardly surprising. Other major contributors to the growth include bumper crops of wheat, rice, sugarcane and maize, construction, finance & insurance and housing services.

According to experts, to sustain the growth trend the government will have to be vigilant and undertake long overdue structural reforms without further delay.

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