NewsExport and inflation target unlikely to be achieved: Economic Survey report
ISLAMABAD: Pakistan's economy has grown at an average rate of almost 7.0 percent per annum during the last five years and real GDP grew strongly at 7.0 percent in 2006-07 as against the revised estimates of 6.6percent for last year and 7.0 percent growth target for the year, the Economic Survey 2006-07 said.
However, the target of increasing exports and decreasing inflation could not be achieved.
Economic Survey - pre-budget document was released at a press conference jointly addressed by Advisor to the Prime Minister on Finance - Dr Salman Shah and Advisor to the Finance Ministry - Dr Ashfaq Hasan Khan here Friday.
According to the Economic Survey, growth of value addition in Commodity Producing Sector (CPS) is estimated to increase by 6.0% in 2006-07 as against 3.4% in 2005-06.
Within the CPS, agriculture and manufacturing grew by 5.0 percent and 8.4 percent, respectively.
Major crops witnessed an impressive growth of 7.6 percent as against a negative growth of 4.1 percent last year.
Livestock exhibited signs of moderation from its buoyant growth of 7.5percent last year to 4.3 percent in 2006-07.
Large-scale manufacturing registered a growth of 8.8% in 2006-07 against the target of 12.5.0% and last year's achievement of 10.7%.
As a result of structural transformation, the share of agriculture in GDP has declined by 3.2 percentage points in the last 6 years alone and the share of the manufacturing sector has increased by 3.1 percentage points in the same period.
Construction registered a massive growth of 17.2 percent in 2006-07 as against 5.7 percent last year mainly because of reconstruction work in quake affected areas, higher PSDP and pick-up in private housing market.
The services sector grew by 8.5% in 2004-05, by 9.6% in 2005-06 and by 8.0% in 2006-07.
Finance and insurance sector spearheaded the growth in the services sector and registered stellar growth of 18.2 percent during the current fiscal year 2006-07, which is slightly lower than 33.0 percent of last year.
Value added in the wholesale and retail trade sector increased by 7.1% in 2006-07 compared to 8.6% growth in 2005-06. Value added in the transport, storage and communications sector grew by 5.7% from the previous year compared to 6.9% growth in 2005-06.
Public administration and defense posted a growth of 7.0 percent while ownership of dwellings grew by 3.5 percent and social services sector improved its growth performance to 8.5 percent from 6.3 percent last year.
Pakistan's per capita real GDP has risen at a faster pace during the last four years (5.1% per annum on average in rupee terms) leading to a rise in average income of the people.
Such increases in real per capita income have led to a sharp increase in consumer spending during the last three years.
The per capita income in dollar term has grown at an average rate of 13.0 percent per annum during the last five years rising from $ 586 in 2002-03 to $ 833 in 2005-06 and further to $ 925 in 2006-07.
The main factor responsible for the sharp rise in per capita income include acceleration in real GDP growth, stable exchange rate and four fold increase in the inflows of workers remittances.
As opposed to an average annual increase of 1.4 percent during 2000-2003, real private consumption expenditure grew by 12.1 percent in 2004-05 but declined in the subsequent two years to 3.3 percent in 2005-06 and 4.1 percent in 2006-07.
The commodity producing sectors (agriculture and industry) has contributed 30.2 percent or 2.9 percentage points to this year's growth while the remaining59.8 percent or 4.2 percentage point's contribution came from services sector.
Within the CPS, agriculture contributed 1.1 percentage points or 15.1 percent to overall growth while industry contributed 1.8 percentage points or 22.7 percent.
The contribution of wholesale and retail trade has increased to 19.4 percent or 1.4 percentage points to GDP growth in 2006-07.
Finance and insurance has also contributed 13 percent or 0.9 percentage points to this year's growth.
Consumption accounted for 49.8 percent or 3.2 percentage points to economic growth in 2006-07 while investment accounted for 52.7 percent or 3.4 percentage points to the growth.
The Economic Survey 2006-07 said that the overall developments in the money and credit sector during the fiscal year 2006-07 have been satisfactory and werei n line with the Credit Plan Target.
During July-May 12, 2006-07, money supply (M2) grew by 14 percent against the annual target of 13.46 percent and last year expansion of 12.1 percent for the same period.
Net domestic assets have increased to 389.6 billion as compared to increase of Rs.314.4 billion in the same period of last year.
Net foreign assets have a record increase of Rs.88.2 billion against the increase of Rs.43.8 billion in the same period of last year.
Government borrowing for budgetary support has also recorded an in crease of Rs.212 billion as compared to Rs.73.4 in the same period of last year
Credit to private sector amounted to Rs.263.4 billion during July-May12, 2006-07 as compared to Rs.339.9 billion in the same period last year.
Credit to manufacturing sector recorded to be Rs.119 billion compared withRs.132 billion in the same period of last year.
There was a substantial decrease in personal loans amounting Rs.38.8 billion as compared to Rs.67.2 billion during Jul -May 12,2005-06 Weighted average lending and deposit rates increased to 10.6 percent and3.9 percent in March 2007 while weighted average yields on 6 months T-bill increased to 8.9 percent in April 2007.
The Khushali Bank (KB) now serves nearly 550,000 clients in 85 districts across the country. The KB has extended loans amounting to Rs.10 billion.
During the first eleven months of the current fiscal year, leading indicators of the stock market displayed positive growth. During July-May2006-07, the KSE 100-share index increased by 29.8 percent while SBP general Index of share prices increased by 14.8 percent.
KSE share index reached to an all time highest figure of 12961 points on May 31, 2007. Market capitalization has increased by a massive of Rs 980 billion, from Rs 2801 billion in June 2006 to Rs 3781 billion in May 2007.
Nine out of 12 major trading groups in the stock market have recorded growth in their share indices, ranging from 2.0 percent to 44.7 percent.
Large-scale merger of banks and a telecom company (Paktel) along with continued momentum of privatization programme have promoted growth of Pakistan's stock markets during the current fiscal year. Over the past few years, the Securities & Exchange Commission of Pakistan (SECP) has taken measures to restore confidence of both foreign and domestic investors.
In the current fiscal year the SECP in consultation with the stock exchanges, has introduced significant capital market reforms in the fields of risk management, governance, transparency and investor protection.
The fiscal year 2006-07 has witnessed concerted foreign investors interest in Pakistan's stock markets as highest ever inflow of portfolio investment ($1.82billion) was recorded during July-April 2006-07.
The inflation rate as measured by the changes in Consumer Price Index (CPI) stood at 7.9 percent during the first ten months (July-April) of the current fiscal year, 2006-07, as against 8.0 percent in the comparable period of last year.
The food inflation is estimated at 10.2 percent and non-food 6.2 percent, against 6.9 percent and 8.8 percent in the corresponding period of last year.
The Wholesale Price Index (WPI) during July-April, 2006.07 have increased by 6.9 percent, as against 10.3 percent of last year.
The Sensitive Price Indicator (SPI) has recorded an increase of 11.1percent during July-April, 2006-07, as against 6.7 percent of last year.
The increase in inflation rate during the current year 2006-07 as against last year is attributable to the increase in food price inflation which has been due to increase in prices of edible oil, pulses, rice, milk, poultry, meat, wheat, wheat flour, fresh vegetables and fruits.
Exports during the first ten months (July-April) of the current fiscal year are up by 3.4 percent - rising from $ 13457.0 million to $ 13909.0 million in the same period last year. Despite improvements in the international trading environment.
Pakistan's export growth witnessed abrupt and sharp deceleration to less than 4.0 percent in the first ten months (July-April) of the current fiscal year after growing at an impressive rate of 16.0 percent per annum in recent years.
What has happened to Pakistan's export in 2006-07? Attempt is made to review the situation and suggests measures to revive its glory of recent years.
Pakistan's imports grew by 8.9 percent or $ 24993.1 million in the first ten months of the current fiscal year.
After growing at an average rate of 29percent per annum during 2003-2006 Pakistan's import growth slowed to a moderate level in the current fiscal year.
As expected, growth in import decelerated to 8.9 percent during the first ten months (July-April) of the current fiscal year as against hefty increase of40.4 percent in the same period last year.
The deceleration in import growth is caused by several factors which include: the pursuance of tight monetary policy to shave off excess demand, softening of international price of oil, decline in imports of cars as a result of change in policy, decline in the imports of fertilizer because of large carryover stock of last year, and decline in the imports of iron & steel as Pakistan Steel coming back to its normal production level. Exchange rate remained more or less stable during the FY07.
However, rupee depreciated only marginally (0.7%) from Rs.60.2138 per dollars as at end June 2006 to Rs.60.6684 as of end April 2007.
In the open market, rupee traded at 60.655 to a dollar, which is at a discount of 0.02 percent as at end-April 2007.
Courtesy Geo