The economy is facing one of the most challenging years in history. It braved many boom-and-bust cycles, but the national economic output, measured by gross domestic product (GDP), never turned negative since 1951-52.

As we conclude the fiscal year on June 30, the economy is officially estimated to have contracted about 0.4 per cent against a growth target of 3.3pc. This is, however, far better performance in view of the doomsday scenarios projected by the lenders’ community until a couple of weeks ago.

All the targets for the real economy were missed this year by a wide margin. In fact, most of the indicators have gone in the opposite direction. The slide is quite steep when seen against the backdrop of 5.8pc growth just two years ago.

GDP itself is now valued at around $265 billion compared to $280bn last year and $313bn at the end of 2017-18. The assessment of economic performance by the National Accounts Committee is based on the actual output data for the first three quarters along with the Covid-19 impact in the fourth quarter.

The per-capita income is estimated to have come down to $1,270 this year from $1,360 last year and about $1,650 in the year before, showing a cumulative decline of almost 23pc. Tax revenues are estimated to face an almost 30pc shortfall against the budgeted target while the fiscal deficit will likely be in double digits.

The total investment-to-GDP ratio has been estimated for 2019-20 at 15.4pc against the target of 15.8pc, but unchanged from the last year’s level of 15.4pc, revised to 15.6pc. The fixed investment-to-GDP ratio is 13.8pc for the current year against the 14.2pc target — again, unchanged from last year’s 13.8pc.

Provisional data shows all major sectors missed their growth targets this year. While agriculture remained in the positive zone, industry and services posted negative growth

Public-sector investment has been calculated at 3.8pc of GDP based on budget allocations for the development programme against the target of 4.1pc and is expected to significantly come down when actualised on the basis of the reduced utilisation in the wake of lockdowns.

On the other hand, the national savings-to-GDP ratio has surpassed its 13pc target and touched 13.9pc, higher than 11.1pc of GDP last year, apparently because of a significant reduction in the current account deficit that nosedived almost 75pc to $2.78bn in the first nine months of 2019-20. This was mainly because of an increase in exports and remittances by 1pc and 6pc, respectively, and a decrease in imports and the trade deficit by 16pc and 31pc, respectively.

The three major real sectors — agriculture, industry and services — missed their targets this year. In fact, industry and services posted negative growth while that in agriculture remained in the positive zone.

For example, the agriculture sector posted growth of 2.67pc against the target of 3.5pc. This is sort of a turnaround when seen in the context of last year’s miniscule 0.58pc growth. However, the growth rate remained significantly less than 4pc that agriculture delivered in 2017-18.

Industry posted dismal performance as its output went down for the second consecutive year. Against 2.4pc growth target, the industrial output declined 2.64pc on top of a 2.27pc drop in 2018-19. The loss appears even greater in the context of 4.61pc growth it posted in 2017-18. Put together, the gross value addition over these two years has slipped back to the level of three years ago. The government attributes this to the Covid-19–related lockdown of industrial units.

Really alarming was the services sector’s performance that moved to the negative zone for the first time in many decades. It contracted by 0.59pc against the target of 4.8pc growth and actual growth of 3.75pc in 2018-19 and 6.35pc in 2017-18.

In the agriculture sector, growth in important crops during this year remained 2.9pc against the target of 3.5pc. This was owing to an increase in the production of wheat, rice and maize at 2.45pc, 2.89pc and 6.01pc, respectively. However, cotton and sugar cane crops witnessed a decline of 6.92pc and 0.44pc, respectively.

Other crops (onion, potato, vegetables etc) showed positive growth of 4.57, higher than the 3.1pc target, mainly because of an increase in the production of pulses, oil seeds and vegetables. The livestock sector registered growth of 2.58pc and missed the target of 3.6pc. This is a notable deviation from its historical growth pattern primarily because of shrinkage in demand for dairy and poultry. Forestry has grown at 2.29pc, higher than the 2pc target. But this was surprising owing to an increase in the production of timber. Last year, forestry had grown by a healthy 8pc.

Talking about the industrial sector, the value added to the mining and quarrying sector declined by 8.82pc against the growth target of 2.5pc. The large-scale manufacturing (LSM) sector has been estimated to have shown a 7.78pc decline against the growth target of 1.7pc.

A major decline has been observed in textile (-2.57pc), food, beverage and tobacco (-2.33pc), coke and petroleum products (-17.46pc), pharmaceuticals (-5.38pc), chemicals (-2.3pc), automobiles (-36.5pc), iron and steel products (-7.96pc), electronics (-13.54pc), engineering products (-7.05pc), and wood products (-22.11pc), according to the Planning Commission.

Growth in LSM had been observed in fertilisers (5.81pc), leather products (4.96pc), rubber products (4.31pc) and paper and board (4.23pc). The electricity and gas sub-sector also grew 17.7pc mainly due to higher subsidies and better value added in Wapda and power companies. The construction activity has risen 8.06pc owing to an increase in the general government expenditure.

Negative 0.59pc performance by the services sector could be attributed to a 3.42pc fall in wholesale and retail trade instead of the targeted 3.8pc growth rate as well as a 7.13pc decline in transport and communication services against the target of 3.5pc.

Most other services remained in the positive territory, although they missed their targets by wide margins. For example, finance and insurance services grew 0.79pc against the target of 6.5pc. The housing sector grew 4.02pc against the 4pc target while general government services grew 3.92pc against the 5.7pc target. Other private services grew 5.39 against the target of 7.1pc.

Published in Dawn, The Business and Finance Weekly, May 25th , 2020