COMPERATIVE GDP GROWTH RATE IN THE REGION

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
July 21 - 27, 2008

The Gross Domestic Product (GDP) one of the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific period of time. Usually, GDP is expressed as a comparison to the previous quarter or year. GDP is concerned with the areas in which income is generated. It is the market value of all the output produced in a nation in one year. GDP focuses on where the output is produced rather than who produced it. GDP measures all, disregarding the firms' nationality.

GROSS DOMESTIC PRODUCT (%)

COUNTRIES

FY 08

FY 07

FY 06

Pakistan

5.80

6.38

6.92

India

8.7

9.21

9.74

China

9.27

11.40

11.10

Bangladesh

5.50

5.58

6.40

Indonesia

6.08

6.31

5.51

Malaysia

7.1

6.32

5.93

PAKISTAN

Pakistan's real GDP growth is likely to remain in the range of 5.5% to 6.0% in the current fiscal year FY07-08. The Pakistan's economy is witnessing some broad deterioration in key macroeconomic indicators due to a combination of adverse domestic and international developments, but it is important to note that the economy has fundamentally gained flexibility as a result of structural reforms and liberalization measures over the last 15 years. The real GDP growth in FY08 is expected to drop below the 6% level for the first time in 5 years, annual inflation is on the edge to returning to double digits, the fiscal deficit is forecast to rise substantially, and the annual current account deficit, as a percentage of GDP, is projected to be at an all-time high. It is seen that over the last 6 months, expansionary fiscal policy has overshadowed and substantially weakened the impact of sustained monetary tightening by the State Bank. This impact of the heavy government borrowings has been particularly obvious in FY08, with the borrowings rising to a record Rs 551.0 bn by May, FY08 almost doubling the total outstanding stock of borrowings to Rs 940.6 bn.

INDIA

Indian economy, one of the world's fastest growing economy is likely to grow at a moderate rate of 8.7% during the current fiscal as against 9.6% during FY06-07, which was the highest in previous 18 years. However, India's industrial production growth slowed to just 3% in March 2008, compared to a 14.8% growth in March 2007. The sectors that actually showed negative growth in March this year included cotton textiles; textile products including wearing apparel, wood and wood products, furniture and fixtures; metal products and parts except machinery and equipment; and transport equipment and parts. The negative growth in the metal products and parts except machinery and equipment sector in March was to the tune of 25.8%.

CHINA

China has geared down its economic growth to 9.27% this year after five consecutive years of double-digit GDP growth. On the basis of improving the economic structure, productivity, energy efficiency and environmental protection this is the fourth year that China has fixed its GDP growth target at 9%, which shows the central government is ready to maintain stable development. New governments in Chinese provinces and regions were likely to seek faster economic growth and expand investment in their first year in office, uncertainties and potential risks of the world economy could also affect China . The impact of the U.S slowdown on China 's exports was still unclear, and China 's economy faces more internal rather than external challenges.

BANDLADESH

Bangladesh's economy is estimated to be low this year as compare to last year. The growth in GDP was projected at 7% in FY07. The downward revision of the GDP growth resulted from the twin floods and cyclone. The production of crops was severely affected by the floods and the cyclone. However, better outturn of potato and maize contributed to higher growth in agriculture in FY07. Export earning has shown a positive growth since the second quarter of the financial year while industries and services sectors also attained higher growth. The contribution of agriculture to GDP has fallen by 0.66% to 20.71% from 21.37%. The contribution of industries and services sectors to GDP has increased by 0.34% and 0.36% in the outgoing financial year. Industries account for 29.74% of GDP, up from 29.40% on the figure of the past financial year, and services 49.58%, up by 49.22%. Therefore it is expected that the economy could grow much higher than 6% if political situation remains stable.

INDONESIA

The growth momentum in FY07 was at a satisfying level, and it is expected that the expansion is to be further accelerated to 6.4% in this year. The growth will again be largely supported by domestic factors, as external demand will weaken with the US and Japanese slowdown. The medium term outlook is broadly favorable, although growth will have to accelerate even further to reverse the weakness in consumer sentiment, as economic growth has failed to translate into substantial job creation.

MALAYSIA

Malaysia is confident of achieving high GDP growth this year because of prudent economic management and without the need for an economic stimulus plan. The country had achieved an encouraging growth of 7.1 % for the first quarter of 2008, surpassing the earlier target. In the first quarter, all sectors have done well, including agriculture, construction, manufacturing and services, to provide positive growth.

CONCLUSION:

Today, this region has become an economic hub in this world; Countries like China and India have become the most powerful emerging economies of the world. Pakistan , Malaysia , Bangladesh and Indonesia are ideal places for the investors. Low cost land, cheap labour and conducive economic environment gives this region a competitive advantage over other regions as investors find themselves easy to invest because of lower cost advantage.