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May 25, 2017
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Size of economy increases to $304 billion

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May 25, 2017

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ISLAMABAD: The Economic Survey for 2016-17 going to be unveiled by Finance Minister Ishaq Dar today (Thursday) will highlight the GDP growth rate at 5.28 percent, increasing the size of the economy at $304 billion and per capita income at $1,629 during the outgoing financial year. Dar while formally launching the Economic Survey will share key economic indicators and the performance of different sectors of the economy with the media.

The minister will also provide an overview of the economic progress made in recent years in Pakistan. He will highlight the main features of the comprehensive reforms agenda undertaken by the present government, which has resulted in macro-economic stability and a 10-year high growth rate of 5.28 percent.

The minister will present the budget for FY 2017-18 tomorrow (Friday) on the floor of the National Assembly. In his budget speech, the minister will provide details of the revenue, expenditure and relief measures envisaged for the next fiscal year.

On the Economic Survey, Pakistan will explain that the government envisaged the real GDP growth of 5.7 percent based upon sectoral growth projections for agriculture, industry and services sectors at 3.5 percent, 7.7 percent and 5.7 percent, respectively.

The macroeconomic indicators showed signs of a marked improvement on the back of agriculture performance, revival of private sector activities, acceleration in large scale manufacturing and expansion in construction sector in 2016-17. The GDP registered a growth of 5.3 percent, though it narrowly missed the target, but it is the highest growth rate during the last nine years.

Agriculture was targeted to grow by 3.5 percent on the basis of expected contributions of important crops (2.5 percent), other crops (3.2 percent), cotton ginned (2.5 percent), livestock (4.0 percent), fishing (3.0 percent) and forestry (3.0 percent). Agriculture met its target of 3.5 percent. Major crops grew by 4.1 percent while other crops registered a growth of 0.2 percent. Livestock, fisheries and forestry achieved growth of 3.4 percent, 1.2 percent and 14.5 percent respectively.  

The overall target of wheat crop was achieved despite lower production from barani areas. Cotton production showed growth of 7.6 percent, though falling short of its target. Rice crop registered a growth of 0.7 percent in its production, whereby the area under rice cultivation decreased by 0.6 percent over the last year. Sugarcane crop remained satisfactory and registered a growth of 7.6 percent. Therefore, the overall growth in agriculture increased by 3.5 percent in 2016-17.

Industrial sector registered a growth of 5 percent during 2016-17 as against the target of 7.7 percent. This growth is driven by construction and manufacturing sector. Manufacturing grew by 5.3 percent in 2016-17. The overall output of large scale manufacturing industries (LSM) increased by 4.9 percent. Mining and quarrying sector posted a growth of 1.3 percent against target of 7.4 percent for 2016-17. Small and household manufacturing met its target of 8.2 percent. 

Value addition in electricity, gas and water supply grew by 3.4 percent against the targeted growth of 12.5 percent. Construction sector showed growth of 9.1 percent against the target of 13.2 percent.

Services sector registered a growth of 6 percent against its target of 5.7 percent with positive contribution by its constituent subsectors. Specifically, wholesale and retail trade, transport, auctioning, hoteling and restaurants have been the major contributors of growth in services in 2016-17.

Wholesale and retail trade managed to grow by 6.8 percent and surpassed its target of 5.5 percent. The subsector, transport, storage and communication, (dominated by transportation services) managed to grow by 3.9 percent, against its target of 5.1 percent. In transportation, the contributors to its positive growth were railways, communication and road and storage. 

Finance and insurance grew by 10.8 percent surpassing its target of 7.2 percent. This was achieved mainly due to better performance of scheduled banks and activities auxiliary to financial services and insurance activities. With positive growth in real estate, construction and residential societies, housing services registered the targeted growth of 4 percent, maintaining the same pace over four consecutive years since 2013-14.

General government services grew by 6.9 percent against the target of 7.0 percent. Most of the government expenditures were on security and defence services. In development expenditures, construction of roads and highways, power generation and social sector expenditures remained on government priorities. Other private services grew positively at 6.3 percent against its target of 6.7 percent for 2016-17.

During 2016-17, fixed investment as a percentage of GDP increased from 14 percent in 2015-16 to 14.2 percent in 2016-17. Public investment as percent of GDP increased from 3.8 percent to 4.3 percent, whereas private investment as percent of GDP declined from 10.2 percent to 9.9 percent. National savings were at 13.1 percent of GDP in 2016-17, falling short of the target of 16.2 percent of GDP.

Overall fiscal deficit was curtailed, from 8.2 percent of GDP in 2012-13 to 4.6 percent in 2015-16 and was targeted at 3.8 percent during 2016-17. The consolidated total revenue during July-March 2016-17 stood at Rs3145.5 billion which is 6.2 percent higher than the total revenue of Rs2,961.9 billion collected during the same period of last year.

The FBR’s tax collection was recorded at Rs2,260.5 billion during July-March 2016-17 as compared to Rs2,103 billion during the corresponding period last year, registering a growth of 7.5 percent. Direct taxes and indirect taxes registered growth of 12.4 percent and 4.5 percent, respectively. Customs duties and federal excise duty recorded growth of 14.5 percent and 10.6 percent respectively. Sales tax registered a growth of 0.4 percent. Current and development expenditures grew by 5.8 percent and 14.9 percent, respectively.

The policy rate stood at 40 years lowest at 5.75 percent as State Bank of Pakistan is pursuing easy monetary policy since second quarter of 2014-15. Money supply (M2) grew by 7 percent (Rs.903.9 billion) during July 2016 to April 2017 compared to its expansion by 6 percent (Rs683.8 billion) during the corresponding period of last year. Private sector credit gained momentum and availed credit not only for working capital but also for fixed investment. Credit to private sector expanded by Rs513.5 billion as against the expansion of Rs336.5 billion last year, showing an increase of 53 percent.

Consumer Price Index (CPI) for 2016-17 targeted at 6 percent was contained at 4.1 percent for July-April 2016-17 as against 2.8 percent in July-April 2015-16. Average SPI was contained in July-April 2016-17 i.e. 1.7 percent as against 1.8 percent last year. Average WPI however registered at 4 percent as against 1.3 percent in July-April 2015-16 which is a good sign of generating economic activity.

The current account deficit for July-March 2016-17 stood at $6.1 billion as against a deficit of $2.3 billion in July-March 2015-16. Trade deficit during the first nine months of this fiscal year stood at $17.8 billion with exports of $16.1 billion and imports of $33.9 billion. Exports declined by 1.4 percent whereas imports increased by 14.2 percent. The decline in exports resulted from global slump in oil and commodities prices. Workers’ remittances amounted to $15.6 billion in first ten months of FY17, compared to $16 billion during same period last year i.e. a decline of 2.8 percent.

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