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AN OVERVIEW OF

PAKISTANS ECONOMY
MAHVISH TABANI
MACROECONOMIC INDICATORS
REAL GDP: FACTS AND FIGURES
Pakistans economy continues to maintain its growth
momentum for the 3rd year in a row

Real GDP growing at 4.71% in FY 2016 highest in eight


years since 2008-09

Growth was 4.04% last year

The economy could not achieve the targeted growth rate


5.5% percent

Reason: Lower growth of agriculture sector (-0.19)% was a major


setback

Factors: Decrease in production of cotton, rice and maize


AGRICULTURAL SECTOR:
FACTS AND FIGURES
Agriculture sector is a vital component of Pakistans
economy

It provides the raw materials to down the line


industries and helps in poverty alleviation impact

This sector contributed 19.82 percent in GDP

It remains the largest employer absorbing 42.3% of


the countrys total labor force
AGRICULTURAL SECTOR:
FACTS AND FIGURES
The agriculture sector growth is contingent on favorable
weather condition.

Pakistans agricultural output is closely linked with the


availability of irrigation water

During FY 2016, the performance of agriculture sector as


a whole remained dismal

A growth of (-0.19)% against 2.53% growth during the same


period last year.
INDUSTRIAL SECTOR:
FACTS AND FIGURES
Industrial sector contributes 21.02% in GDP

The industrial sector during FY 2016 recorded a remarkable


growth of 6.8%

Growth was 4.81% in the last year

This growth is at an all time high in eight years

Reason:

Continuous improvement in electricity and gas supplies which


recorded growth of 12.18%.

Government planned and implemented comprehensive policy


measures to revive the economy.
INDUSTRIAL SECTOR:
FACTS AND FIGURES

Industrial sector performance shows that it has


surpassed the targeted growth of 6.4%

This is an indicator that industrial revival is taking place


on fast track.

The industrial sector has four sub-sectors including


mining & quarrying, manufacturing, electricity
generation & distribution and gas distribution and
construction.
MANUFACTURING SECTOR:
FACTS AND FIGURES
The manufacturing is the most important sub-sector of
the industrial sector

It has a 64.71% share in the overall industrial sector.

Growth of manufacturing is registered at 5.00%


compared to 3.90% last year.

Manufacturing has three components:

Large-Scale Manufacturing (LSM) with the share of 80.11%

Small Scale Manufacturing with the share of 13.12 %

Slaughtering having share of 6.77%


LARGE SCALE MANUFACTURING

The LSM sector contributes 80% in Manufacturing


and 51.8% in industrial sector

Growth of 4.61%

Growth last year was 3.29%

Reason: The major sectors contributing to LSM


growth were automobiles, fertilizer, chemicals,
pharmaceutical, rubber and cement
SERVICES SECTOR: FACTS AND FIGURES

Services sector also met the planned target

It has emerged as the most significant driver of


economic growth and play a major role in
augmenting and sustaining economic growth

The share of the services sector has increased from


56.6% of GDP FY 2009 to 59.16% in FY 2016.

Services sector has witnessed a growth of 5.71% this


fiscal year as compared to 4.31% last year
INFLATION: FACTS AND FIGURES

The average CPI inflation shows a continuous


decline since the past few years

8.62% in FY 2014

4.53% in FY 2015

2.79% during July-April FY 2016

PKR stability helped control CPI inflation and lower


inflation expectations
POPULATION

Pakistan is the sixth most populated country in the world

Estimated population of 195.4 millions.

Population growth rate is 1.89 which is higher as


compared to neighboring countries.

The government is introducing different programs like


Family Welfare Centers (FWC), Reproductive Health
Services Centers (RHS-A), Regional Training Institutes
and Mobile Services Units to curb the growth rates
LABOR FORCE AND EMPLOYMENT

According to the Labor Force Survey 2014-15:


Pakistan has 61.04 million labor force.

Only 57.42 million people got employment and 3.62


million people are unemployed.

Government programs: Youth Business Loan


Scheme, Interest Free Loans Scheme, Youth Training
Scheme and Youth Skill Development Program to
utilize the potential of youth.
PER CAPITA INCOME

Per capita income reflects average standards of living of


people in the country

The per capita income in $ terms has increased from $


1,516.8 in FY 2015 to $ 1,560.7 in FY 2016.

Factors that contributed to this increase in per capita


income include:

Acceleration in real GDP growth

Lower growth in population

Stability of Pak Rupee.


UNEMPLOYMENT AND LABOR FORCE

Unemployment rate has decreased over the year:


6.24% in 2012-13

6% in 2013-14

5.9% in 2014-15.

Most of the labor force in Pakistan works in the rural


areas agriculture

The total labor force working in the agricultural sector


decreased from 43.7% in 2012-13 to 42.3% in 2014-15.

In manufacturing sector the labour force participation


rate has increased from 14.1% in 2012-13 to 15.3% in
2014-15.
EXPENDITURE SIDE: COMPONENT OF
AGGREGATE DEMAND
CONSUMPTION
Main growth drivers are consumption, investment and
exports

Pakistani society like other developing countries is a


consumption oriented society, having high marginal
propensity to consume.

Private consumption expenditure in nominal terms


reached to 80.1% of GDP in FY 2016 (80.0% of GDP last
year)

Public consumption expenditures are 11.8% of GDP


(11.0% last year).
COMPONENT OF AGGREGATE DEMAND:
INVESTMENT

Total investment is Rs 4502 billion (Rs 4256 billion last year)

Growth of 5.78 percent in FY 2016.

Investment to GDP ratio has reached to 15.21 percent in FY


2016.

Fixed investment has recorded growth of 5.57%

Private investment has recorded a growth of 3.71%

Public investment grew by 10.63% indicator that


government expenditure strategy is development
oriented.
INVESTMENT: FACTS AND FIGURES

Many companies of the world are interested for investment


in Pakistan

Of particular interest are the power, energy, oil and gas,


automobiles and textile sector.

Present government has launched comprehensive plan for


investment friendly environment and to attract foreign
investors in the country.

There is continuous uptick in FDI

With the US$ 46 billion CPEC investment it is expected that this will
further rise
FDI: FACTS AND FIGURES

During July-April FY 2016 net foreign direct


investment crossed US$ 1 billion

Growth of 5.4%.

The major inflow of FDI is from US, Hong Kong, UK,


Switzerland and UAE.

Oil & gas exploration, financial business, power,


communications and Chemicals remained major
sectors for foreign investors.
SAVINGS

Saving is a key determinant of achieving higher level of


investment in the country.

National savings increased from 14.5% to 14.6% of GDP in


this fiscal

Domestic savings are recorded at 8.3% of GDP in this


fiscal year as compared to 8.4%

Net foreign resource inflows finance the saving


investment gap.

It is essential for the sustainable growth that saving


investment gap should be filled
EXPORTS

A matter of concern is the decline in our exports


particularly textile.

Factors that could have caused this decline in textiles:

The slowdown in Chinese economy resulted in huge unsold


stock of yarns and fabric and stiff competitive and limited
demand created uncertainty in the textile sector.

The yarn and fabric prices also declined noticeably in India.


LABOR FORCE AND EMPLOYMENT

Pakistan is one of the largest labor exporting


countries in the region

Remittances from the overseas is one of the major


source of income for families and also for the
development of the country.

The government is committed on producing skilled


workers in order to send them abroad.
WORKER REMITTANCES

Largest source of foreign exchange earnings after


exports.

Remittances have a growth of 5.25 percent over the


last year.

Growth in remittances can be owed to the initiatives


taken by the present government under Pakistan
Remittance Initiatives.

The remittances data provide clear evidence that


overseas Pakistanis are playing significant contribution
in socio-economic development of the country.
CAPITAL MARKET: FACTS AND FIGURES

The capital market has reached historical levels

This is a sign of investors interest in Pakistans


economy

Merger of all the three stock exchanges: Karachi


Stock Exchange, Lahore Stock Exchange and
Islamabad Stock Exchange into a single Pakistan
Stock Exchange (PSX) during current fiscal year

Fiscal year 2015-16: Overall steady rise in the stock


market indices - historic and unprecedented levels
are being crossed
CAPITAL MARKET: FACTS AND FIGURES

All the major world stock markets witnessed sluggish


trends during this period. (China, Japan, Hong
Kong, India, USA, UK)

Factors contributing to the relatively better


performance of the Pakistan stock:

Stable macroeconomic indicators


Relative stable exchange rate
Downward inflationary trend
Prudent monetary policies
Pakistans possible reclassification from a frontier market to an
emerging market
CAPITAL MARKET: FACTS AND FIGURES

The PSX is all set to rejoin the MSCI Emerging Market


Index

The reclassification will take place this financial year


(May 2017) and it will change the dynamics of the
Pakistan equity market

Pakistan stock exchange is undergoing several


changes and its market fundamentals are strong
FX RESERVES: FACTS AND FIGURES

FX reserves at an all time high above US$ 21 billion in


May 2016

Can finance over 5 months of the countrys import bill

Helped maintain exchange stability

The foreign currency reserves are projected to rise even more


FISCAL DEVELOPMENT:
FACTS AND FIGURES
The present government has implemented a wide-
ranging agenda of economic reforms

Aim: Ensure fiscal discipline and accelerate


economic growth.

Result: Pakistan has made a considerable


improvement in restoring economic stability

Now the economy is moving on a high growth


trajectory with a target of 7 percent by 2018.
FISCAL DEVELOPMENT:
FACTS AND FIGURES
The fiscal sector: Improvement on account of contained
expenditures and increased revenues.

The budget deficit: Decline from 8.2% of GDP in FY2013 to


5.3% in FY2015

Reduction in power subsidies and raising tax revenues.

Fiscal deficit: 3.4% of GDP during July-March, FY2016 against


(3.8% of GDP last year).

Fiscal deficit target for the FY2016 4.3%

This will be further brought down to 3.5% of GDP by FY2018.


MONETARY POLICY: FACTS AND
FIGURES

The outgoing fiscal year FY 2016 has seen more


expansion in credit to private sector

This has been due to expansionary monetary policy


stance by SBP.

Expansionary Monetary Policy along with


infrastructure development drive of the government
are positive signals for restoring the investors
confidence.
BUSINESS: FACTS AND FIGURES

The international rating agencies also upgraded their


rating for Pakistan.

Pakistan has been able to complete eleventh


successful reviews with IMF

Implications:

This has further strengthened the confidence of international


investors

It has placed Pakistan on their radar screen as future


investment destination.
BUSINESS: FACTS AND FIGURES

MCCI Overseas Investors Chamber of Commerce and


Industry (OICCI) latest Business Confidence Index (BCI)
Survey- Wave 12 reached a level of 36% positive

This shows 14% improvement over Wave 11 results in


November 2015

Implications of BCI score:

Level of bullishness by the overall business community


throughout the country

Depicting a move back to an expansionary cycle.


BUSINESS: FACTS AND FIGURES

Other factors that contributed to boosting the


confidence of the business community:

The reduced cost of ongoing business due to reduction in


petroleum product prices

Low single digit inflation and borrowing rates

Expectations of better economic condition following CPEC

Ongoing energy projects based on coal and LNG


ON THE SOCIAL SIDE

The literacy rate has improved to 60% in FY 2016

The literacy rate was 58% in FY 2014.

Literacy rate is higher in urban areas (76%) than in rural areas


(51%).

Literacy higher among male than female.

Province wise: Punjab leads with 63%, Sindh with 60%, Khyber
Pakhtunkhwa with 53% and Balochistan has the lowest literacy rate
of 44%.

Data: Pakistan Social and Living Standards Measurement (PSLM)


Survey
ON THE SOCIAL SIDE

Public Expenditure on Education as percentage to


GDP is estimated at 2.2% in FY2015 (2.1% of GDP in
FY2014) increase of 4.8 %

Poverty rate has come down as estimated on both


old and new methodology

National Health Insurance program has been


launched where poor families will be provided with
free of cost health insurance to access secondary
as well as primary diseases treatment without any
financial obligation
FURTHER READING

Pakistan Economic Survey 2015-16