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GDP growth rate falls to 3.29pc in FY19; agricultural, industrial growth registers sharp slowdown

The economy grew at an average rate of 3.29 per cent (provisional) in fiscal year 2018-19 against an ambitious target of 6.2pc set in last year’s budget, the Pakistan Economic Survey revealed on Monday.

Sector-wise growth rates:

  • Agriculture: 0.85 per cent (against target of 3.8pc)
  • Industry: 1.4pc (against target of 7.6pc)
  • Services 4.7pc (against target of 6.5pc)

Revenue collection

Total revenue at Rs3,583.7bn (9.3pc of GDP) showed almost 0pc growth from July-March 2019, while growth in total expenditures was 8.7pc. The fiscal deficit was recorded at 5pc of the GDP compared to 4.3pc in the corresponding period last fiscal.

“Decelerated performance of total revenues primarily was due to marginal growth of 1.8pc in tax revenues and negative growth of 16.7pc in non-tax revenues,” the PES explained.

The Federal Board of Revenue’s tax receipts from July-April 2019 remained at Rs2,976bn against Rs2,922.5bn in the corresponding period last year, registered growth of 1.8pc.

“Actual tax collection during [the] first 10 months of the CFY remained at 67.7pc of revised target of Rs 4,398bn,” the document said.

Provincial revenue collection rose by 1.5pc from July-March 2019.

Expenditures

The government’s total expenditure increased by 8.7pc from July-March 2019 to Rs5,506.2bn (14.3pc of GDP) against last year’s spending of Rs5,063.3bn (14.6pc of GDP).

Current expenditure posted growth of 17.7pc to Rs4,798.4bn (12.4pc of GDP).

The federal and provincial governments’ current expenditures grew by 19.9pc and 13.7pc respectively during the period under review.

Development expenditure decreased to Rs655.9bn this fiscal compared to last year’s expenditure of Rs993.3bn, exhibiting 34pc negative growth compared to 23.6pc positive growth recorded last year.

The Public Sector Development Programme (PSDP) share in total development expenditure stood at 88pc or Rs578.5bn in the first nine months of the fiscal year. The same period last year saw Rs931.4bn expenditure.

This year’s PSDP expenditure saw a 37.9pc decline, while last year witnessed 24.7pc growth in PSDP spending.

The federal and provincial PSDP decreased by 14.5pc and 52.2pc respectively during July-March 2019 compared to the same period last year.

Deficits

According to the PES, exports fell by 1.9pc despite exchange rate depreciation, while imports declined by 4.9pc.

“This helped in reducing the trade deficit by 7.3pc during July-April FY18-19, while it had shown an expansion of 24.3pc during the corresponding period last year,” the document stated.

The current account deficit contracted by 27pc from July-April 2019, while it had expanded by 70pc in the corresponding period last fiscal year.

“Workers’ remittances played a major role in containing the current account deficit to 4.03pc of GDP,” the report said.

Inflation

The Consumer Price Index witnessed a rising trend in fiscal year 2018-19. It increased to 5.8pc in July 2018 after remaining sticky at 5pc for two months, and rose to 6.8pc in October 2018 “due to an increase in gas prices”, the PES noted.

From July-April 2019, headline inflation measured by the CPI averaged 7pc against the 3.77pc measured in the corresponding period last year “on the back of the prevalence of some underlying demand in the economy, as well as continued pass through of exchange rate depreciation and higher fuel prices.

Core inflation (non-food and non-energy) was recorded at 8.1pc compared to 5.6pc in the same period last year.

“The rising input costs on the back of high utility prices and the lagged impact of exchange rate depreciation is likely to maintain upward pressure on inflation during the remaining period of current fiscal year. The impact will be more visible on non food prices while the food prices are likely to remain stable due to effective monitoring of prices and smooth supply of essential commodities by the federal and provincial governments,” the PES said.

FDI and remittances

Remittances saw an 8.45pc increase in July-April 2019 compared to 5.36pc last year, reaching $17.88bn in the first 10 months of the fiscal year against $16.48bn last year.

“On the back of initiatives taken by the government and the trend observed, it is expected that the target of $21.2bn for FY2019 is likely to be achieved,” the report said.

Foreign investment dropped by 51.7pc in July-April 2019 to $1.377bn compared to $2.85bn in the same period last year.

Foreign direct investment from China comprised 31.2pc of overall inflows compared to 60.5pc in the preceding year.

“However, China continued to dominate direct investment, followed by UK and Hong Kong. A considerable decline in investment from Malaysia has been observed in this period,” the PES noted.

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