Economy to fall short on growth target: IPR

LAHORE: The IPR report on six months of economic progress of the country, depicting below par performance of the country, has predicted that the economy would fall well short of its target growth rate of 5.1 percent, Managing Director Institute of Policy Reforms, Dr Hafiz Pasha said on Thursday.
Revealing the IPR report, he regretted that despite ambitious plans of the government, the Pakistan economy remained mired in difficulties during the first half of the current fiscal year.
“A major concern is continued slow growth in large scale manufacturing,” he said adding that industrial growth this fiscal year would be even lower than the four percent achieved last year.
Public and private investment is weak, tax collection has fallen well below the target, and exports have declined in the face of an overvalued exchange rate, he said. To maintain the reserves, government took substantial debt and has not shown any resolve to take administrative measures in order to increase tax collection or improve DISCO performance.
Pasha said all determinants of growth such as agriculture and industrial production remained sluggish and below the growth rate of the last fiscal year and that the trade deficit widened by 36 percent.
He said the target for industrial growth was 7.0 percent while large-scale manufacturing grew only by 1.5 percent. Similarly, growth of major crops was 2.5 percent in July December 2014 compared to 3.7 percent in 2013.
Pasha pointed out that the generation of power grew by only 5.0 percent above the level attained two years ago. Performance of DISCOs hobbled the sector and so far, it is unclear how the benefits from low fuel price would help strengthen the power supply.
“It is unlikely that the economy would meet the investment target of 16 percent of GDP,” he said adding that important segments, such as, textiles and agriculture witnessed double digit decline.
Despite increase of $2.4 billion in borrowing, reserves grew only $1.5 billion, which showed that the borrowings financed BOP deficit. He considered this a risky strategy adding that decline in export was a cause of concern.
An overvalued exchange rate had reduced competitiveness of Pakistani exporters. One fortuitous development was decline in inflation, down from 9.0 percent for the July December 2013 period to 6.0 percent for the same period in 2014.
However, growth in home remittances and receipt of coalition support fund alleviated the situation, and foreign direct investment saw an increase though the total amount remained low.