ISLAMABAD: Pakistan’s economy will grow at a higher rate in the outgoing fiscal year, beating international lenders’ predictions. However, due to a downturn in the manufacturing and service sectors, it failed to meet budgetary projections.
The provisional GDP growth is anticipated to be 2.38 per cent for FY24, surpassing the projections of International Monetary Fund’s 2pc, Asian Development Bank’s 1.9pc and World Bank’s 1.8pc.
However, the State Bank of Pakistan has forecast a 2-3pc economic growth in FY24.
The government has projected a GDP growth target of 3.50pc, but it is all set to miss it.
GDP set to grow 2.38pc in FY24, surpassing lenders’ forecast
On Tuesday, the National Accounts Committee (NAC) confirmed quarterly GDP growth rates for Q1 (revised), Q2 (revised), and Q3 of FY24, as well as the annual provisional growth rate for FY24. The committee finalised and updated growth rates for FY22 and FY23, respectively.
According to provisional NAC figures, the economy grew steadily at 2.09pc during the third quarter of FY24. Agriculture, industry, and services all grew at 3.94pc, 3.84pc, and 0.83pc. During the third quarter, all agricultural constituents contributed favourably, including key crops (2.89pc due to wheat), other crops (1.14pc), cotton ginning (61.75pc), and livestock (4.20pc).
The NAC has also revised its growth estimates for the first two quarters of the fiscal year upwards; Q1 now stands at 2.71pc and Q2 at 1.79pc, reflecting an improvement from the initial projections of 2.50pc and 1pc, respectively.
Based on the estimates for the first three quarters, the NAC has also projected an estimate for the entire FY24, which suggests that the economy will grow at 2.38pc owing to higher-than-expected growth in the agriculture sector. Agriculture’s provisional growth rate is 6.25pc, while industry and services’ growth rates are 1.21pc each.
Agriculture
Agriculture emerged as the primary engine of growth in FY24. The overall increase in the agriculture sector not only exceeded the target of 3.50pc but also remained higher than the 2.27pc growth of last year.
Further analysis shows that agriculture’s healthy growth is mostly owing to double-digit growth in important crops — 16.82pc in FY24, driven by bumper wheat crops of 11.64pc. Wheat production is expected to reach 31.44 million tonnes in FY24, up from 28.16m tonnes the previous year.
Cotton production will increase by 108.22pc, from 4.91 to 10.22m bales, while rice yield will increase by 34.78pc, from 7.32 to 9.87m tonnes.
Two important crops, sugarcane and maize, are expected to fall shortly in FY24. Sugarcane yield would fall 0.39pc from 87.98m tonnes to 87.64m tonnes in FY24, while maize yield will fall by 10.35pc to 9.85m tonnes from 10.99m tonnes. Furthermore, the provisional increase in other crops is 0.90pc, cotton ginning & miscellaneous component 47.23pc, livestock 3.89pc, and forestry 3.05pc.
Industry
The industrial sector grew by 1.21pc in FY24, falling short of the target of 3.40pc. In FY24, the mining and quarrying industries outperformed projections, while manufacturing growth fell short of the projected target. The mining and quarrying industry witnessed a growth of 4.85pc because of an increase in crude oil production (1.51pc), coal (37.72pc), other minerals (7.57pc), limestone (7.95pc), and marble (23.22pc).
Large-scale manufacturing has witnessed a nominal growth of 0.07pc with mixed trend in the production of various groups — food (1.69pc), wood (12.09pc), coke & petroleum (4.85pc), pharmaceuticals (23.19pc), beverages (-3.43pc), textile (-8.27pc), tobacco (-33.59pc) and non-metallic mineral products (-3.89pc).
The electricity, gas, and water supply industries showed negative growth of 10.55pc due to a decrease in subsidies in real terms due to the high deflator. The construction industry increased by 5.86pc due to an increase in construction-related expenditures by private and public sector enterprises.
Services
The services industry also grew by 1.21pc in FY24, but fell short of the target of 3.60pc. However, it remains slightly higher than the previous year’s growth of 0.01pc. Detailed analysis of the industry reflects a mixed trend. Wholesale and retail trade has witnessed a growth of 0.32pc because of positive growth in agriculture output. The transport and storage industry has increased by 1.19pc because of an increase in the output of railways, water transport, and road transport.
Due to high inflation, real growth in the information and communication, finance and insurance, public administration, and social security industries has become negative at 3.02pc, 9.64pc, and 5.25pc, respectively. Furthermore, both the education and human health and social work industries have posted positive growth at 10.30pc and 6.80pc, respectively.
Other private services have been estimated at 3.58pc based on indicators received from the sources.
Published in Dawn, May 22nd, 2024
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