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April 16, 2018

Good growth


April 16, 2018

Amidst all the narrative of doom and gloom in the economy, there is one figure that has remained solid: the GDP growth rate. While the federal government is set to miss its target of six percent economic growth, it has presented a robust 5.8 percent economic growth figure for its last year in power. The data has been presented by the National Accounts Committee (NAC) four months early, but it shows much of the positive picture that the federal government has painted about Pakistan’s economic recovery. Surely, the outgoing government is to be congratulated for being able to deliver high economic growth amidst a difficult environment. The security and power challenges that the government inherited have not been addressed. However, the overall business environment in the country has improved, especially in the context of the ongoing Chinese investment in the economy. The result is the most robust growth rate in 12 years. This is surely a figure that the PML-N will trumpet to push its credentials as a business-friendly political party. In contrast, the last PPP government was consistently met with low growth of around two percent.

The real question for the voter will be whether the benefits of the economic growth have been felt on the ground. This is a test of the trickle-down thesis in economics, which predicts that high economic growth makes its way to the most impoverished sectors of society. The problem is that the economic growth seen has not been job intensive. Unemployment figures remain high as almost two-thirds of the growth came from the services sector. The result is that, while GDP grew by 5.6 percent, per capita income only increased by 0.6 percent in dollar terms. This comes to around 11 percent in rupees but this is trickier business as real income for families seems to have remained static. The government can only claim a positive story in the agricultural sector – of around 3.5 percent growth, in contrast with the two percent growth last year. This can be said to have stemmed the narrative of agricultural collapse that was doing the rounds a couple of years ago, but it does not mean that concerns around the health of the agricultural sector do not remain. There are concerns over industrial sector growth, which missed the government target of 7.3 percent growth, despite numerous policy benefits, tax breaks and preferential electricity supply. Growth in construction and power remained low despite the heavy prioritisation of the two sectors, which seem like strange figures. Going forward, the government has set a 6.5 percent growth target next year – which is thought to still be less than the seven percent needed to address unemployment. Moreover, the need for equitable growth has to be highlighted once again. Pakistan is doing well but it’s not out of the water yet.

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