Economic growth has increased but most targets couldn’t be met

 

ISLAMABAD: Federal Minister for Finance Senator Ishaq Dar has conceded that the government has missed major economic targets of GDP growth, revenue, investment and inflation in the outgoing year.
The GDP growth remained at 4.14 percent against a target of 4.4 percent but in the last six years, this is the first time that Pakistan registered over 4 percent growth against the revised target of 3.7 percent, taking the per capita income up to $1,386 in 2013-14 from the revised target of $1,369 in 2012-13. Tax collection remained at 16 percent and inflation increased by 8.5 percent and unemployment registered an increase of 6.2 percent.

Announcing the results of the Economic Survey at a news conference, the finance minister said in the first year of its rule, the government spent its time in fire fighting and in the second financial year, which is 2014-15, the masses will be witnessing dividends of the prudent economic policies.

The minister said that he himself fixed the aggressive economic targets for 2013-14 so that the government could not remain complacent and because of hard work and good economic governance, the government had performed well in terms of achieving the GDP growth of 4.14 percent.

He vowed to increase the GDP growth by 1 percent every year and said that the size of the GDP had swelled close to $300 billion. The minister said the unemployment rate had increased to 6.2 percent from 5.9 percent from 2009-10. He stated that the impact of the war against terrorism remained at $102 billion and 50 percent of the population was living below the poverty line of $2 a day income.

“The vulnerable segments of the society will be taken care of and it was I who first proposed the Benazir Income Support Programme as target subsidy to provide solace to the poorest of the poor. The last government in five years time increased the BISP allocation from Rs34 billion to just Rs40 billion,” he said.

However, the government has increased the allocation under the Benazir Income Support Programme to Rs75 billion in the current financial year, which will be increased further in the next budgetary year. Next year, the government will provide financial help to 4,700,000 poor people.

Coming to the GDP growth analysis, the minister said that the overall industrial growth remained at 5.84 percent in the first nine months against 1.37 percent in the same period of the last year. He said the Large Scale Manufacturing (LSM) sector grew by 5.31 percent as against 4.1 percent last year.

The construction sector grew tremendously by 11.3 percent in the first nine months of the current financial year as against the negative growth of 1.7 percent in 2012-13.

Electricity generation and gas distribution sector grew by 3.72 percent against the negative growth of 16.3 percent in the last financial year. “This has really helped increase growth of the industrial sector.” He said growth in small and household sector stayed at 8.4 percent against the growth of 8.3 percent in the same sector last year.

However, the Economic Survey said during 2013-14, energy consumption was 40,185 million TOEs compared to 40,026 million TOEs in 2012-13 showing a growth of 0.4 percent. Now the industrial growth could be questioned with an increase in electricity consumption by 0.4 percent.

However, the minister admitted the agriculture sector growth remained very low at just 2.1 percent against 2.88 percent last year. However, in the next budgetary year, the government will come up with alluring incentives to increase the growth in agriculture sector.

Dar said the growth in important crops remained at 3.7 percent as against 1.2 percent last year. Other crops that included oil seeds and pulses showed negative growth at 3.5 percent as against 6.1 percent last year. He said that the country also witnessed a reduction in growth as cotton production remained at 12.77 million bales against 13.03 million bales.

The minister said that for agriculture sector, the government allocated Rs380 billion for the current year against Rs315 billion last year. Next time the government will increase the credit lines for the agriculture sector. He also mentioned that fertilisers also remained short and the government had somehow managed to provide the imported fertilisers at Rs1,786 per bag plus Rs25 of dealers margin. “We brought down the prices of fertiliser from Rs1,952 per bag to Rs1,786,” he said.

Mentioning the services sector, the minister said that this sector failed to perform up to the expectations as it grew by 4.3 percent against the growth of 4.9 percent in the last financial year.

In transport, storage and communication sector, the growth remained at 3 percent against 2.9 percent, in wholesale and retail trade 5.2 percent against 3.4 percent, finance and insurance 5.2 percent against 9 percent, housing services remained at 4 percent against 4 percent last year and growth in general government services tumbled by 2.2 percent against 11.3 percent and in other private sector, the growth stayed at 5.8 percent as against 5.2 percent.

About inflation, the minister said that during the July-April period, it remained at 8.8 percent against 7.75 percent last fiscal. However, till May this year, inflation remained at 8.6 percent as against 7.5 percent. About the core inflation which he termed very important saying it remained at 8.2 percent against 9.7 percent in 11 months of the outgoing fiscal.

The minister also said that government borrowing had reduced and the monetary policy had improved. Highlighting the exports of the country, he said that exports had increased by 4.24 percent to $21 billion in the last 10 months against $20.1 billion in thesame period last year and because of the GSP Plus, the textile sector grew by 7 percent and raw cotton export 42 percent. However, it would have been better if the value addition had been added and finished products exported instead of exporting raw cotton. However, the imports, the minister said, had increased by 1.2 percent to $37.1 billion from $36.7 billion in 2012-13. Dar mentioned the reason for the increase in exports saying that plants and machinery had been imported on a large scale, which is in a way a positive sign for growth in economy.

Investment to GDP has reduced to 13.99 percent from 14.57 percent of GDP last year. Fixed investment has also tumbled to 12.39 percent of the GDP against 12.79 percent. Out of this, the private investment remained at 8.94 percent against 9.64 percent of GDP. Dar said that total investment was recorded at Rs3,276 billion in 2012-13, which increased to Rs3,554 billion in 2013-14. The minister said that Foreign Direct Investment (FDI) had reached $2.979 billion that also included the $2 billion Euro Bond. However, in the last year in the same period it stood at $1.277 billion.

Talking about the foreign exchange reserves, the minister said that reserves had reached $13.66 billion against $11.4 billion. He mentioned in February last year, the reserves stood at just $7.5 billion out of which the central bank reserves were at $2.7 billion. Now the situation had completely changed as right now the State Bank of Pakistan reserves had reached $8.8 billion whereas the reserves of commercial banks were stagnant at $4.8 billion.The growth in remittances has slightly reduced to $12.894 billion from $13.921 billion.

4.1pc GDP growth in six months, claims Dar

ISLAMABAD: Finance Minister Ishaq Dar has claimed that Pakistan witnessed a GDP growth of 4.1 percent in the first half of the current financial year against 3.4 percent in six months of the last financial year.

However, in the first nine months of the current fiscal, revenue of the country increased to Rs1,574.6 billion against the Rs1,352.3 billion collected during July-March in the last fiscal showing the growth of 16.4 percent.

During the press briefing here on Wednesday, the minister said that budget deficit had come down 3.1 percent (Rs815 billion) in the first nine-month period against 4.6 percent (Rs1,046 billion).

Dar said that remittances had increased by 11.9 percent to $11.58 billion during the nine-month period from $10.35 billion. Exports have increased to $19.11 billion in nine months of the current fiscal year from $18.02 billion in the same periodof the last year, showing the growth of 6.1 percent. Forex reserves have swelled to $11.67 billion.

As far as inflation is concerned, it stood at 8.6 percent during July-March 2013-14 whereas it was at 7.98 percent in the same period of the last financial year. He said that 3,188 companies have been registered with the SECP in the first nine months of the current fiscal against 2,883 companies that got registered in the same period of the last financial year, showing a growth of 10.57 percent.

The growth in large manufacturing scale stood at 6.05 percent as against 2.78 percent in the period under review of the last fiscal year. “We have planned to give a credit line of Rs380 billion to the agriculture sector during the ongoing financial year, which is up by 13.09 percent if compared with Rs336 billion disbursed in last year,” Dar said.

Growth in industrial production contracts 1.9 % in February

Manufacturing sector pulls down growth

Bellying hopes of a recovery, industrial production slipped back into negative territory in February, according to official data released on Friday. Continuing lacklustre manufacturing performance, especially in capital goods, dragged industrial production to negative growth of 1.9 percent, the data released shows. In February 2013, the Index of Industrial Production (IIP) had grown modestly by 0.6 percent.

For January, the Central Statistics Office (CSO) revised the data for factory output upward to positive growth of 0.8 percent from the provisional estimate of 0.1 percent.

Factory output as measured by the IIP had started to decline in October 2013, when it had contracted 1.2 percent. The trend continued till December.

Cumulative growth in the 11-month period April 2013 - February 2014 stood at (-) 0.1 percent against positive growth of 0.9 percent in the corresponding period of the previous year, according to the data released. It is, therefore, unlikely that 2013-14 will end with positive industrial growth.

It is very unlikely that there will be positive growth in March, said Care Ratings, as the base year effect is quite sharp. “With a peak index in March 2013, the month-on-month growth in March 2014 will have to be 12.4 percent for even zero growth,” said Care Ratings Chief Economist Madan Sabnavis, “Therefore, overall manufacturing and industrial growth will be negative in March as also for the entire year”.

The weak industrial output performance continues mainly on account of poor consumer demand. High inflation and unaffordable interest rates on EMIs have dented the consumer sentiment.

Manufacturing, which constitutes over three-fourth of the index, shrunk 3.7 percent in February. It had grown 2.1 percent in the same month in the previous year. During April 2013 – February 2014, the sector's output contracted 0.7 percent.

Production of capital goods shrank 17.4 percent, in sharp contrast to an expansion of 9.1 per cent in the same month in 2012. The segment declined 2.5 percent in April-February over a contraction of 7.7 per cent in the same 11-month period in the previous year.

Overall, 13 of the 22 industry groups in manufacturing showed negative growth in February as compared to the corresponding month of 2012.

The industry group ‘Radio, TV and communication equipment and apparatus’ showed the steepest negative growth of (-) 34.1 percent, followed by (-) 24.6 percent in ‘Electrical machinery and apparatus’ and (-) 21.3 percent in ‘Wearing apparel; dressing and dyeing of fur’.

On the other hand, the industry group ‘Furniture manufacturing’ grew the most–by 9.3 percent, followed by 9.1 percent in ‘Textiles’ and 6.1 percent in ‘Coke, refined petroleum products and nuclear fuel’.

Govt following three-point agenda to spur growth: Dar

ISLAMABAD: Federal Minister for Finance, Senator Mohammad Ishaq Dar on Saturday said that the government was pursuing a three-point agenda, focused on addressing economy, energy and extremism to put the country on path of progress.

In a meeting with Managing Director (MD), World Bank Group, Sri Mulyani Indrawati, the minister said the prime minister has an agenda of addressing the core impediments hampering economic growth in consonance with its true potential.

“Our efforts have started yielding results in addressing long-delayed issues and pulling the country out of its economic woes,” he remarked.

The finance minister highlighted that the macro-economic situation was improving as reforms are making progress; growth is picking up and inflation is in single digits. He said that besides appropriate economic measures, the government was working on a plan to develop infrastructure and meeting the requirements of energy demand in the country. Dar thanked the MD for her personal interest in Pakistan-related programmes including CASA1000 and Dasu hydropower projects. He also spoke about landmark steps the prime minister recently announced with the objective to generate business opportunities for the youth and assist them in attaining educational excellence.

He said that changes were being contemplated in relevant tax laws for permanently eliminating the discretion of Federal Board of Revenue (FBR) to issue special tax exemptions. He said that the measures will lead to enhanced revenue generation and the country will be able to spend more on the development programmes. He underscored that Privatization strategy was in place to provide a holistic framework for disinvesting public sector assets.

The finance minister informed that good governance, transparency and zero tolerance for corruption remains the hallmark of the government in pursuing strategic partnership with the private sector in PSEs.

Dar said that the prime minister has an agenda of addressing the core impediments that are hampering economic growth. The finance minister said that the government has embraced a proactive energy policy to invite new investment in energy sector with a special emphasis on the renewable and cheap energy sources. He emphasised that the international assistance will help the government in addressing poverty and socio economic uplift of the people.

On the occasion, the WB MD appreciated the economic policies of the government and said that World Bank will help Pakistan in poverty alleviation and promoting shared prosperity for the people of Pakistan. She said that Pakistan has an encouraging macro-economic framework and this will lead to enhanced confidence in Pakistan by international community and institutions. She also appreciated increased allocation for social safety network programmes.

She said that Pakistan has strong support of the World Bank for its economic revival under its leadership and expected fast track progress on energy projects. She mentioned that the focus of the World Bank will remain on tackling the energy crisis, increasing economic opportunity for women and youth and improving service delivery.

She also informed the finance minister that the World Bank would consider Country Partnership Strategy (2014-19) for Pakistan on May 1 this year. She said that participation of the private sector in energy sector reforms will be a strong message to the foreign investors and one success in this regard will lead to another success. She wished success for Pakistan in launching of Eurobonds in the international market and auction of spectrum licenses.

China manufacturing growth slows to eight month low: govt

BEIJING: China's manufacturing growth fell to an eight-month low in February, government figures showed on Saturday, reflecting further weakening in the world's second-largest economy but also the effect of a major holiday.
The purchasing managers' index (PMI) tumbled to 50.2, the National Bureau of Statistics reported on its website, in the third straight drop from 50.5 in January, 51.0 in December and 51.4 in November.
A figure over 50 indicates expansion while one below shows contraction.
This marked China's 17th consecutive month of manufacturing growth but at a slowing rate -- the lowest since a June reading of 50.1.
China's economic growth has weakened in recent years, hitting 7.7 percent in 2013, the lowest level since 1999. Analysts expect a further drop to 7.5 percent this year.
The lowered forecast comes as Beijing has pledged to reform the country's growth model so that consumers and other private actors play a more significant role, rather than massive and often wasteful state investment.
Whereas in the past authorities have reacted quickly to inject cash to stimulate a slowing economy, recently they have remained tight-fisted instead.
Two liquidity crunches occurred last year in part because officials sought to impose stricter discipline over banks amid burgeoning debt levels.
But the recent Lunar New Year, China's most important holiday, may also have dampened results, Bank of America Merrill Lynch economists Ting Lu and Xiaojia Zhi said in a research note.
"We believe the drop was mainly impacted by the Lunar New Year holiday," they wrote, adding that they expected a bounce back up to 50.5 in March.
"Markets will likely respond negatively to the reading but the impact could be limited. Policies are unlikely to be impacted by these distorted PMI readings," they said.
In another closely watched indicator of Chinese manufacturing, British banking giant HSBC said last week its preliminary PMI reading for February dropped to a seven-month low, to 48.3, down from a final figure for January of 49.5.
HSBC is set to release its final PMI reading for February on Monday.