Shortcomings: Weak spending keeps GDP growth below target

The growth came on the back of industrial expansion while targets in agriculture and services sectors, which contribute about three-fourth of the total national output, were missed. ********************************************************************************************************* ISLAMABAD: The PML-N government could not achieve its first-year growth target, as the economy grew at a pace of 4.14% in the outgoing fiscal year – still the figure carries a substantial risk of downward revision when public spending statistics are finalised. The growth came on the back of industrial expansion while targets in agriculture and services sectors, which contribute about three-fourth of the total national output, were missed. The National Accounts Committee (NAC) on Thursday approved the provisional growth rate of 4.14% for fiscal year 2013-14, which will end on June 30. In comparison, the gross domestic product (GDP) growth target was 4.4%. Contrary to claims of attracting fresh investment in the industrial sector, the NAC figures showed that investment in large-scale manufacturing fell 23.7% in the fiscal year. Capital injection into the overall manufacturing sector dropped 21.5%. “The growth rate is provisional and subject to change on the basis of actual national accounts,” said Asif Bajwa, Chief Statistician of Pakistan, while talking to The Express Tribune. NAC has taken into account the public sector development spending set in the budget, though actual expenditure is expected to be less than half of the allocation, according to officials privy to the NAC meeting. NAC estimated the growth in the construction sector on the basis of Rs1.155 trillion worth of spending by the federal and provincial governments. Actual expenditure would stand below Rs600 billion, the officials said. Against an allocation of Rs615 billion, the four provinces spent only Rs199 billion in the first nine months of the fiscal year. They are making profit by keeping cash with the federal government instead of utilising it on provision of social services. The federal government too spent only Rs196 billion in nine months compared to allocation of Rs540 billion. According to officials, the reduced expenditures will shave 0.2 percentage point off economic growth, bringing it down to 3.9%. In the construction sector, NAC showed 11.3% growth in the outgoing fiscal year. The estimates are based on provisional information for nine months, which is used to make projections for the entire year. Net national income grew Rs406 billion, according to NAC documents. Of 23 key growth indicators, the government achieved only eight targets while performance of the remaining 15 indicators, mainly the agriculture and services sectors, remained below expectations. The 4.1% economic growth was better than last year, as revised accounts of the previous year put economic expansion at 3.7%. The growth is also far higher than the International Monetary Fund’s estimate of 3.3%. Pakistan needs an annual growth of 7% to 8% to create jobs for new entrants into the market, suggest studies carried out by the Planning Commission. Anything below this leads to increase in unemployment and poverty, the commission says. In some sectors, the results look encouraging. Industries The sector beat the growth target of 4.8% and grew 5.84% in the outgoing fiscal year, according to NAC. Last year, it had achieved only 1.4% growth. Though sub-sectors such as small-scale manufacturing, slaughtering, electricity generation and distribution and mining and quarrying missed their targets, large-scale manufacturing and construction rose past the benchmarks. Services This sector, the biggest component of the economy, fell short of the 4.6% target and notched up 4.3% growth. Sub-sectors including transport and communications, finance and insurance, general government services and other services could not reach their targets. However, wholesale and retail services hit the growth rate set for them. Agriculture The sector stood way short of the expected growth of 3.8% and grew just 2.1%. Last year, it had recorded a 3.3% expansion. The sector achieved production targets for major crops, but missed the targets of other crops, cotton ginning, livestock, forestry and fishery by wide margins. Published in The Express Tribune, May 16th, 2014.