The State Bank of Pakistan reported that Pakistan’s economy is well positioned to meet the GDP (Gross Domestic Product) growth target of 6.0 percent in FY2018. All three sectors of the economy namely; agriculture, construction and services are projected to contribute to the enhancing performance.
|Details||FY16||FY17||Target||FY18 Estimates||Growth (percent)|
|Production (million tons)|
|Cotton (million bales)|
It is also mentioned in the report that latest prediction on the major kharif crops explain important improvement on last year’s situation: not only that all the major crops (except cotton) surpassed their targets, a number of crops (e.g., sugarcane, rice and maize) posted record production level. Higher fertilizer offtake and sufficient water availability contributed towards this performance. Similarly, agricultural credit disbursement has explained an impressive YoY rise of 50.1 percent in Q1-FY2018 (6.6 percent in Q1-FY17), which is encouraging, as the State Bank has set a higher target of Rs 1.0 trillion for FY2018 as against to Rs 700 billion for FY2017. Encouragingly, in addition to traditional formal channels, disbursements through microfinance banks and institutions are also picking up pace, as these witnessed a YoY increase of Rs 14.5 billion.
Large Scale Manufacturing
Experts also calculated that the Large Scale Manufacturing (LSM) registered a healthy broad-based growth of 10 percent during Q1-FY2018, which is 8.1 percentage points higher as against to the corresponding period last year. This performance is also the strongest since the manufacturing index was rebased in FY2006. Significant contribution came from construction and consumer durables industries. A number of developments explain this performance, for example, better energy supplies, strong domestic demand, growing purchasing power and enhanced security condition.
Construction Allied Industries
The report further revealed that progress on China-Pakistan Economic Corridor Projects (CPEC) related projects, increased Public Sector Development Program (PSDP) spending on infrastructure projects, and continued private investment in housing schemes were the primary drivers of growth in the construction allied sectors like steel and cement. Furthermore the growth in cement production gained momentum as it increased by 12.4 percent during Q1-FY2018, as against to 7.8 percent during the same period last year.
Strong domestic dispatches (21.9 percent higher) were the chief contributor to this growth, though the industry witnessed a slide in exports (down by 16.7 percent). FED by 25 percent in the federal budget FY2018, and the price of key input, i.e. coal was increased by 10.6 percent in the global market. Both developments were anticipated to push up cement prices. On the other hand the production growth of the steel sector accelerated during Q1-FY18, standing about 47 percent, as against to 13 percent during the corresponding period last year.
The leading indicators pertaining to the services sector paint an overall encouraging situation. The wholesale and retail trade segment benefitted from a healthy growth in manufacturing alongside a rise in import volumes. With respect to transport, storage & communication, a recovery in credit offtake shows confidence of the players, while rise in sales of commercial vehicles and petroleum products shows an uptick in transport activities. Similarly, the on-going expansion and upgradation of road networks under CPEC is complementing the performance, particularly considering that much of the growth observed is in the high-type road category, signaling a focus toward building major highways. The State Bank also mentioned that high cellular density and growing broadband users, meanwhile, continued to push the telecom sector up during Q1-FY2018. On the other hand, rises in assets and deposits of commercial banks show that the finance and insurance sub-sector is off to a healthy start.