ISLAMABAD: All three key sectors of the economy failed to meet their targets by wide margins, with industry taking the brunt as it contracted by around 3 per cent compared to the agricultural and services sectors, which did manage to stay in the positive territory in a year marked by turmoil.

The industrial sector was also the only one of the three whose share in the gross domestic product shrank — from 19.1pc a year ago to 18.5pc.

In contrast, the share of agriculture in GDP slightly rose to 22.9pc from 22.6pc. The share of services — the largest sector by contribution to the economy — in GDP rose to 58.6pc from 58.3pc.

Agriculture

Agricultural production grew by a meagre 1.55pc during the outgoing fiscal year compared to growth of 4.27pc last year due to the catastrophic floods that led the domestic production below the required levels, the Pakistan Economic Survey said on Thursday. As a result, the prices of all essential food items rose to historic highs.

Estimating the total damage in the agriculture sector at about Rs800 billion, the key government report, released a day before the budget, stressed that restoring the livelihoods of smallholder farmers and livestock keepers was urgent and time-sensitive for meeting the rabi cropping season and preventing further losses to livestock assets and production.

Economy fails to meet any growth targets

This year, the rabi season — which lasts from November to April — remained challenging for the peasants of Sindh and Balochistan, the two provinces hit hardest by the floods.

As for the outlook of the agriculture sector, the survey said better crop productivity was expected in the coming years due to various incentives for the farmers and the sector as a result of the measures taken by the government.

The devastating floods caused damage to kharif crops — sown in summer — and the decline in important crops stood at 3.2pc. Rice production declined to 7.32 million tonnes from 9.32m, down 21.5pc in a year. Similarly, cotton production dipped 41pc to 4.91m bales from 8.33m bales a year ago.

However, sugarcane recorded production of 91.1m tonnes over last year’s production of 88.65m tonnes, rising 2.8pc. Maize production increased by 6.9pc to 10.18m tonnes against last year’s 9.52m tonnes.

The livestock sector has emerged as the largest contributor to agriculture, accounting for around 62.7pc of the agriculture value added and 14.4pc of the national GDP during Fiscal 2023.

The gross value addition of livestock increased to Rs5,593bn during the outgoing fiscal year from Rs5,390bn in the previous fiscal year, increasing by 3.8pc.

Additionally, the net foreign exchange earnings of the livestock sector contributed around 2.1pc of the total exports in the country, the survey said.

Wheat production slightly rose to 27.63m tonnes from 26.21m tonnes, showing an increase of 5.4pc. Other crops, having a share of 14.5pc in the agriculture value addition and 3.32pc in GDP, grew by 0.23pc during 2022-23 due to an increase in the output of oilseeds.

During July-March, the agriculture lending financial institutions disbursed Rs1,222bn, which was 67.2pc of the overall annual target and 27.5pc higher than Rs958.3bn disbursed during the same period last year.

Industry

The industrial sector — comprising four key subsectors: mining and quarrying; manufacturing; electricity; gas and water supply; and construction — took the brunt as it contracted 2.94pc.

Much of the shrinkage was due to an 8pc decline in large-scale manufacturing (LSM), which falls under manufacturing and has the biggest share in the industrial sector. In stark contrast, large-scale manufacturing saw growth rates of over 11pc over the past two years.

However, the four sectors that saw growth included wearing apparel, leather products, furniture, and others (such as football).

“The proliferation of risks, including the global economic slowdown and flood damages, coupled with the SBP’s restrictive policies such as high-interest rates, import restrictions, and the closure of LCs [letters of credit] to correct the balance of payments and control inflation, has created headwinds for businesses, consumer confidence, and investment,” the Economic Survey said.

“Thus, the industry weighed down by various domestic and external factors leading to a slowdown in its performance in FY2023,” it added.

The mining and quarrying sector remained negative at 4.4pc during July-March against a dip of 7pc last year. The development of the mining sector has been hindered by inadequate infrastructure, lacking technology, and insufficient financial resources.

Production of major minerals such as coal, dolomite, barium sulphate, limestone and rock salt grew by 17.6pc, 42.2pc, 53.6pc, 10.6pc and 12.4pc, respectively, during July-March. However, some contracted, including natural gas -9.3pc, crude oil -10.2pc, chromite -12.6pc, magnesite -50pc, gypsum -5pc, sulphur -25pc, soapstone -43.2pc, and iron ore -51.6pc.

Services

The growth in the services sector, which has the largest share of around 58pc in GDP for the last several years, came at 0.86pc, missing the 5.1pc target by a wide margin.

However, there was a mixed trend within the industries.

The wholesale and retail trade industry, which constitutes 30.7pc of services and 18pc of the total GDP, declined by 4.46pc due to negative growth of 4.57pc in the output of crops, a decline of 8pc in LSM, and the negative growth in imports (-12.68pc).

On the contrary, transportation and storage, the second largest services sector, increased by 4.73pc, whereas accommodation and food services activities grew by 4.11pc.

Information and communication jumped 6.93pc due to an increase in telecommunication. The finance and insurance industry fell by 3.82pc. Real estate activities grew by 3.72pc while public administration and social security (general government) activities dropped by 7.76pc.

Education services grew by 10.44pc due to public sector expenditure. Human health and social work activities also increased by 8.49pc due to the general government. The provisional growth in other private services was 5pc.

Published in Dawn, June 9th, 2023