Growth prospects

The Pak Banker - - FRONT PAGE -

Ac­cord­ing to lat­est of­fi­cial es­ti­mates, the fis­cal deficit for the cur­rent year is es­ti­mated at 5.5pc of GDP - far higher than the bud­geted tar­get of 4.1pc - while the tar­get for next year is be­ing set at 5.3pc of GDP. The cur­rent ac­count deficit on the other hand is of­fi­cially tar­geted at $12.5 bil­lion (3.8pc of GDP) for next fis­cal year com­pared to $10.8bn in first eight months of the cur­rent year. The fig­ure for same pe­riod last fis­cal year stood at $7.2bn. The cur­rent ac­count deficit for the out­go­ing fis­cal year is es­ti­mated at $13.7bn or 4.4pc of GDP. Need­less to say, high fis­cal and cur­rent ac­count deficit in 2017-18 may pose a chal­lenge on ex­ter­nal front.

The govern­ment ex­pects ex­ports to go up to $27.3bn in 2018-19 com­pared to $24.5bn of cur­rent year while im­ports are tar­geted to rise to $56.5bn from $53.1bn this fis­cal year. This would re­sult in trade deficit of $29.2bn next fis­cal year com­pared to $28.6bn dur­ing cur­rent fis­cal year.The govern­ment es­ti­mates that the resur­gence of global com­mod­ity prices in 2018-19 would be a pos­i­tive sig­nal for ex­porters. But con­certed ef­forts are re­quired to en­hance qual­ity of ex­portable, di­ver­sify prod­uct range and look for new mar­kets. With CPEC in­vest­ments and bet­ter per­for­mance in in­dus­trial sec­tor, ex­ports are ex­pected to gain mo­men­tum and grow by 11.6pc com­pared to 6.3pc in­crease in im­ports dur­ing 2018-19.

In over­all terms, the govern­ment is op­ti­mistic about pos­i­tive eco­nomic growth for 2018-19 on ac­count of strong ex­pected per­for­mance of agri­cul­ture, steady growth in in­dus­trial sec­tor em­a­nat­ing from ac­cel­er­a­tion in large-scale man­u­fac­tur­ing and im­proved en­ergy sup­ply. In­fla­tion, though slightly pick­ing up, is ex­pected to re­main be­low 6pc for the next year. The govern­ment also projects over­all macroe­co­nomic sta­bil­ity in view of en­cour­ag­ing agri­cul­ture per­for­mance and steady in­dus­trial growth. The GDP growth for 2018-19 is tar­geted at 6.2pc with con­tri­bu­tions from agri­cul­ture (3.8pc), in­dus­try (7.6pc) and ser­vices (6.5pc). But the growth tar­gets would be sub­ject to favourable weather con­di­tions, man­ag­ing cur­rent ac­count deficit, con­sis­tent eco­nomic poli­cies and aligned mon­e­tary and fis­cal poli­cies. The agri­cul­ture sec­tor is tar­geted to grow by 3.8pc on the ba­sis of ex­pected con­tri­bu­tions from im­por­tant crops (3pc), other crops (3.5pc), cot­ton ginned (8.9pc), live­stock (3.8pc) fish­ery (1.8pc) and forestry (8.5pc).

Higher pro­duc­tion of cot­ton crop is also ex­pected dur­ing 2018-19, given bet­ter per­for­mance in 2017-18 and in­creas­ing trend in prices. The growth prospects for live­stock, fish­ery and mi­nor crops are also bright. On the in­dus­trial side, the Plan­ning Com­mis­sion an­tic­i­pates ro­bust growth. In view of steady growth rate dur­ing the cur­rent fis­cal year, the in­dus­trial sec­tor is ex­pected to grow by 7.6pc dur­ing 201819 on the back of bet­ter en­ergy sup­ply and planned in­vest­ment un­der China- Pak­istan Eco­nomic Cor­ri­dor (CPEC). The mining and quar­ry­ing sec­tor is pro­jected to grow by 3.6pc, man­u­fac­tur­ing sec­tor by 7.8pc, LSM by 8.1pc, con­struc­tion by 10pc and elec­tric­ity gen­er­a­tion & dis­tri­bu­tion and gas dis­tri­bu­tion by 7.5pc. More­over, the in­crease in con­sumer de­mand is ex­pected to fur­ther spur pri­vate sec­tor ac­tiv­i­ties and help main­tain ag­gre­gate de­mand.

Sim­i­larly the ser­vices sec­tor is tar­geted to grow by 6.5pc in 201819, sup­ported by growth of 7.8pc in whole­sale & re­tail trade, 4.9pc in trans­port, stor­age & com­mu­ni­ca­tion, 7.5pc in fi­nance & in­surance, 4pc in hous­ing, 7.2 per­cent in gen­eral govern­ment ser­vices and 6.8 per­cent in other pri­vate ser­vices. The fis­cal pol­icy dur­ing 2018-19 would re­main fo­cused on con­tain­ing fis­cal deficit, mo­bil­is­ing more rev­enues, con­trol­ling cur­rent spend­ing and switching to tar­geted sub­si­dies while pri­ori­tis­ing de­vel­op­ment spend­ing. an ex­pan­sion­ary mon­e­tary pol­icy has gen­er­ated eco­nomic ac­tiv­ity in pri­vate sec­tor over the cur­rent year and there were signs of im­prove­ment in LSM with ex­pan­sion plans an­nounced by ma­jor in­dus­tries. Thus, mo­men­tum in the de­mand for credit is ex­pected to pick up pace.

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