Economic Survey of Pakistan 2007-2008

Economic Survey of Pakistan 2007-2008

The government has recently issued the Economic Survey 2007-2008. The salient features of the report are as follows;

GDP and per capita income
Real GDP grew at 5.8% in 2007-08 as against 6.8% compared from the last year against the target of 7.2% growth. Pakistan’s economy has grown at an average rate of almost 6.6% per annum during the last five years (FY’04-FY08). Per capita income in dollar term has grown at a compound average growth rate of 10.8% over the period of six years to US$1,085 in 2007-08 from US$586 in 2002-03.


Agriculture
Agriculture is still the single largest sector of the national economy but has shown a dismal performance this year. Overall agriculture growth this year is estimated at just 1.5% in 2007-08 from 3.7% of last year. Except sugarcane production, which grew by 16.8% during 2007-08, the other major crops were showing decline. Rice production has shown an increase of just 2.3% in 2007-08.
Wheat production was declined by 6.6% to 21.7m tons in 2007-08 as compared to 23.3m tons last year. Cotton production at 11.7m bales in 2007-08 also declined 9.3% during the year. As far as pulses are concerned, the minor crop, exhibited an impressive growth during 2007-08. A member company of group


Large Scale Manufacturing
Manufacturing is the second largest sector of the economy. Overall manufacturing grew by 5.4% this year as against the target of 10.9%. Large-scale manufacturing (LSM), accounting for nearly 70% of overall manufacturing, grew by 4.8% against the target of 12.5%.


Money and Credit
During Jul-May10 FY08, money supply (M2) grew by 9.0% against the annual target of 13.7% last year’s expansion of 14% for the same period last year. Net domestic assets increased to Rs656.7b as compared to the increase of Rs395.5b in the same period last year. Net foreign assets recorded a decline of Rs289b against the increase of Rs84.6b in the same period last year.

Inflation
The CPI-based inflation stood at 10.3% in 10mths’08 — significantly higher than 7.9% recorded in the corresponding period of last fiscal year — remained above the target of 6.5%for the year. Food inflation is estimated 15% over 10mths of FY08 as against 10.2% of last year.

Fiscal Development
The overall fiscal deficit was targeted at Rs398b or 4.0% of GDP for FY08 but this percentage could cross 6.5% of GDP. Government borrowing for budgetarysupport grew phenomenally by Rs362b during 2007-08 as compared to Rs263.4b in the last year. Therefore, M2 growth is expected to go beyond the target of 13.7%. Credit to private sector amounted to Rs369.8b during Jul-May10, FY08 as compared to Rs263.4b in the same period last year.


Balance of Payment
Pakistan’s current account deficit (CAD) further widen to US$11.6b (6.8% of GDP) in 9mths’08 from US$6.6b (4.6% of GDP) in the same period last year. Much of deterioration has taken place due to the rising trade deficit and the outflows from services.


Workers Remittances
Worker remittances totaled US$5.31bb in 10mths’08 as against Rs4.45b in A member company of group
the same period last year, depicting a growth of 19.5%. Major portion came from USA 27.5%, Saudi Arabia 18.8% and UAE17.1%. If this trend continues worker remittances are likely to touch US$5.8b for the year, the highest so far in country’s history.


Investments
Total investment as a percentage of GDP could not sustain the record height of 23% in FY07 and declined to 21.6% in 2007-08. During FY07 the fixed investment was 21.3% which has declined to 20.0% in 2007-08. The overall foreign investment during the 10mths’08 declined by 32.2% and
reached at US$3.6b against US$5.3b in the same period last year. Foreign direct investment (FDI) reached at US$3.48b as compared to US$4.18b in the comparable period of last year, depicting a decline of 16.7%
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Trade balanceThe merchandise trade deficit widened to US$17b in 10mths’08 as against US$11b in the same period last year. However, as a percentage of GDP, trade deficit is likely to be 12.3% in FY