Warning: Error while sending QUERY packet. PID=3846739 in /home/pakist13/public_html/wp-includes/wp-db.php on line 2007
Pakistan’s economic growth and global perspective
Home / This Week / Research / Pakistan’s economic growth and global perspective

Pakistan’s economic growth and global perspective

The Government of Pakistan officials mentioned in a statement that although domestically the government was following stabilization process, however globally, growing rising trade tensions posing a risk to the worldwide growth outlook in FY2019. After a strong growth during 2017 and early 2018, worldwide economic activity slowed noticeably in the second half of last year, reflecting a confluence of factors affecting major economies. This is the reason International Monetary Fund (IMF) has revised downward real Gross Domestic Products growth for almost all countries in World Economic Outlook, April 2019 for FY2019.

Officials also mentioned in the Pakistan’s survey that the growth in the United States, bolstered through fiscal stimuli, has continues to be robust. China’s growth fell following a combination of needed regulatory tightening to rein in shadow banking and a rise in trade tensions with US. In the European region, economic activity stayed somewhat weaker during FY2018-19 owing to slowing net exports, while growth in advanced economies was predicted to have decelerated slightly (to 2.2 percent). Elsewhere, natural disasters hurt activity in Japan. Trade tensions increasingly took a toll on business confidence thus financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand.

According to World Bank report January 2019, “Global Economic Perspective”, South Asia growth is expected to accelerate to 7.1 percent during 2019, underpinned by strengthening investment and robust consumption. While local demand continues to be the main driver of growth across the region and the cyclical upturn in the exports performance is encouraging, the region needs to redouble its policy attempts towards strengthening its international competitiveness. In fact, South Asia is lagging on various competitiveness indicators, such as attracting foreign investments, penetrating new markets and diversifying and upgrading its exports products. In addition, trade openness and regional integration remains limited.

According to the United Nations Conference on Trade and Development (UNCTAD) report released in January 2019, the global foreign direct investment (FDI) inflows fell sharply during 2018, following a 23 percent decline in 2017 from the last year, to $1.43 trillion, with a 41 percent predicted decline in the first half of 2018. The fall was largely concentrated in developed states and was chiefly due to large repatriations of foreign earnings from affiliates of foreign investors from USA following tax reforms implemented through the Government of the United States. However, in external trade, for South Asia region, the performance of exports is slowly picking-up in various economies.

Further, the outlook for demand from main destinations, like United States and EU, remains optimistic. This weak international condition has also affected FDI in Pakistan also its exports. Statistics also explained that during July-April FY2019, FDI dropped by 51.7 percent and foreign private investment also decreased by 64.3 percent. Pakistan’s exports have been on a falling trend since FY2013. Overall export recorded a pessimistic growth in each of 3 consecutive years like FY2014-16 and was almost stagnant in FY2017. During FY2018, export increased by 12.5 percent over the level of last year as exchange rate was adjusted by an aggregate of 14.2 percent during the year. However, compared to FY2013 level, export was still lower by 0.12 percent. In FY2019, the government officials also mentioned that the positive trend in exports continued in the first quarter of the fiscal year as exports were 4.2 percent higher than the first quarter of FY2018. However, with economy in general and manufacturing sector in particular slowing down under the weight of economic adjustment, export started to fall. During the first nine months of FY2019, export recorded an overall fall of 1.9 percent over the same period of FY2018.

 

During the period under review, imports fell by 4.9 percent, whereas growth in imports was optimistic during first two quarters of the fiscal year. The Government of Pakistan is trying to eliminate the anomalies and giving tax incentives/exemptions to facilitate the domestic and international investors. More recently, the Government of Pakistan has received the first tranche of 991.4 million US dollars from IMF under its 6 billion US dollars loan program for Pakistan.

On the other hand, the Asian Development Bank approved a $500 million loan for Pakistan. Economists also believe that the money is to support and enhance the Pakistan’s trade competitiveness and exports. It will also help defend Pakistan against external shocks and help finance the country’s trade deficit.

Real gdp growth rates (%)
Group / Country NameWEO, April 2018WEO, Oct 2018WEO, April 2019Forecast
2018 2019 2018 2019 2018 2019
World3.93.93.73.73.63.3Decline
Euro area2.4221.91.81.5Decline
United States2.92.72.92.72.31.9Decline
Japan1.20.91.10.910.9Decline
Other Advanced Economies2.42.32.42.22.21.9Decline
Emerging Market and Developing Economies4.95.14.74.84.54.4Decline
Pakistan5.64.75.84.05.22.9Decline
Source: Pakistan Survey, FY2018-19
Conclusion

To break the cycle of recurring instability, the present government has designed a roadmap for stability, growth and productive employment. In short term, sharp adjustment and infusion of external financing will be needed while in medium term planned structural reform particularly focusing on export competitiveness, re-establishing fiscal stability and improving governance in key utilities and SOE’s will be implemented.

Check Also

Market Indicators

Market Indicators

Market indicators are a series of technical indicators used by traders to predict the direction …


Warning: Error while sending QUERY packet. PID=3846739 in /home/pakist13/public_html/members/library/Am/Lite.php on line 562