Economic data paints bleak picture on growth prospects; targets tougher to meet

ISLAMABAD: The country is in danger of missing its six percent growth target in the current fiscal year of 2018, with eight months data of industrial output, commodities sector and fiscal side painting bleak picture and adding pressure on policymakers who are struggling to revive a troubled economy in the elections year.

“All major contributors of growth are showing declining trends and are on path of nosedive,” said a senior official, requesting anonymity. “The growth pattern is going to remain more or less the same in the next two months and on the basis of those numbers the NAC (National Accounts Committee) will calculate provisional growth estimates in April.”

The government is eyeing Gross Domestic Product (GDP) growth of 6 percent during the current fiscal year. Economy grew by 5.3 percent in the last fiscal year. The government intended to unveil next budget in early May so the growth figures will have to be finalised in April on the basis of available data of first eight months (July-Feb) period of the current fiscal year.

The official said growth prospect is expected to fall sharply and it is impossible to even go close to the desired target of 6 percent.

“To be fair, forecasters at the IMF (International Monetary Fund) and various credit agencies have also overestimated growth while the government built optimistic projections only to cut them later.”

Analysts said growth projections of international financial institutions and credit agencies are based on growth trends of the last few years. None of them bothered to go into the details for analysing the data of major contributors of growth for the first half, they added.

Planning Commission, in the annual plan for 2017/18, said the growth target is subject to risks of extreme weather fluctuations, interruption in envisaged reforms and non-aligned monetary and fiscal policies.

The growth target for FY2018 assumes contributions from agriculture (3.5 per cent), industry (7.3 per cent) and services (6.4 percent).

“The performance of different economic indicators demonstrates clearly that Pakistan can hardly touch 5 percent mark on account of GDP growth this year keeping in view outcome related to major contributors of growth trajectory,” another official at the finance ministry said.

Government envisaged agri-credit target of one trillion rupees for the current fiscal year. The credit is so far going up to the mark for the current fiscal year, but the target is considered as a deception tool because it’s hard to differentiate that how much it is used in shape of rollovers and how much it is meant for new credit that could have some impact on agriculture growth.

Sugar production led LSM to post amazing growth last year but it will be hard to get such a massive push in the current fiscal year.

Government envisaged sugarcane production at 81 million tons for the current fiscal year, but lingering controversy over crushing and delayed payments to growers negatively impacted the prospects of achieving the desired production target despite that sugarcane acreage increased in comparison with cotton crop.

Annual wheat production target was set at 26 million tons, but a government aerial survey showed that the area under wheat cultivation dropped. There has been 16 to 17 percent water shortage. While recent rains benefited Barani areas it would have a very little impact on wheat production target.

Growth in large scale manufacturing sector nosedived to 5.5 percent in the July-December period of the current fiscal year and it will continue to decline further due to high base effects. Credit to private sector stood at Rs293 billion in the in July-Feb period of the current fiscal year as against Rs305 billion in the same period of the last fiscal year.