Growth rate predicted to flatline at 0-0.5pc, agriculture faces downturn

By Staff Reporter

ISLAMABAD: Pakistan’s growth rate is anticipated to remain stagnant between 0 and 0.5 percent for the outgoing financial year of 2022-23, with concerns mounting over a potential downturn in the crucial agriculture sector.

The National Accounts Committee (NAC) is scheduled to convene next week to calculate the provisional figures for the Gross Domestic Product (GDP) during this period.

Measures are being taken to counteract this potential downturn and steer the economy toward positive growth. However, the underperformance of crucial sectors including agriculture, industry, and the service sector suggests that GDP growth is expected to remain within the 0 to 0.5 percent range for the current fiscal year.

Initially, the government aimed for a GDP growth target of 5 percent for 2022-23, driven by anticipated growth rates of 3.9 percent in agriculture, 7.1 percent in manufacturing, and 5.1 percent in the services sector.

However, both the International Monetary Fund (IMF) and World Bank projected a GDP growth range of 0.5 percent for the ongoing fiscal year.

The agriculture sector, heavily reliant on wheat production, is expected to experience negative growth. The extent to which it will veer into negative territory remains uncertain, while the livestock sector’s performance is expected to be weak, particularly within the poultry industry.

During the first eight months (July-Feb) of the current fiscal year, the Large Scale Manufacturing (LSM) sector witnessed a contraction. Additionally, within the services sector, credit to the private sector has hit a new low, with banks disbursing a mere Rs 72 billion thus far in the current fiscal year compared to Rs 800 billion during the same period last year. The Wholesale and Retail trade sectors are also expected to experience declining trends due to import compression.

Inflation, a significant concern, has surpassed initial expectations. While the government projected an inflation rate of 11.5 percent in the lead-up to the last budget for 2022-23, it is now projected that the average Consumer Price Index (CPI)-based inflation will hover around 29-30 percent for the current fiscal year.

During the National Economic Council (NEC) meeting, where the macroeconomic framework for 2022-23 was approved, Prime Minister Shehbaz Sharif expressed a desire to push the real GDP growth to 6 percent for the current fiscal year.

However, initial estimates suggest that Pakistan may witness its third-lowest GDP growth figure ever recorded in 2022-23. The country experienced negative GDP growth for the first time in 1951 and faced a 1 percent contraction in 2019-20 due to the COVID-19 pandemic. Current expectations indicate that GDP growth will remain low, ranging from 0 to 0.5 percent.