Islamabad has revealed that two of Pakistan’s three major economic sectors contracted, with the industrial and agricultural sectors showing lower growth rates compared to targetted levels.
The Ministry of Finance (MOF) released its biannual State of Economy Report, which associated the slow growth rates in agriculture with the decline of cotton, maize, sugarcane and rice yields. Data from the report revealed that growth in important crops shrank by upwards of 11 percent during the first quarter of the year.
Cotton production dropped by almost 30 percent, while Maize yields recorded a decline of about 16 percent. Rice and Sugarcane yields declined marginally, posting a drop of 1.2 percent and 2.2 percent, respectively.
Furthermore, according to the report, the slowdown could be a result of the high ‘base-effect’ in the sector because of the last fiscal year. For reference, the base effect is a statistical phenomenon where growth in the current period seems to be subpar because of the exceptional growth rate a sector experienced in the previous period.
While the report highlights the negative growth rate in Pakistan’s industrial sector, it also downplays the severity by mentioning that the rate of contraction declined from 4.43 percent in the previous year to a little over one percent.
The ‘gradual improvement’ stated in the report is a result of moderation across sectors such as the agricultural sector.
According to reports, the government commented on how well Pakistan is positioned to post higher growth rates in the current year because of a multitude of reasons. These reasons stem from Islamabad’s efforts to consolidate fiscally while stringently following the targets set by the International Monetary Fund (IMF).
Furthermore, the State Bank of Pakistan’s (SBP) implementation of an expansionary monetary policy might boost growth rates to respectable levels. The SBP has been able to cut its policy rate by a staggering 1,000 points as it has successfully controlled the rate of inflation in the economy.
As per reports, global commodity prices have declined steadily allowing for Pakistan’s exchange rate to stabilise. Analysts are citing these factors as reasons for anticipating a possible growth surge in Pakistan.
Moreover, the report highlighted that the existence of a ‘more favorable environment’ for both consumer and industrial sectors is going to help fast-track economic growth.
Amid the plethora of negative news, Islamabad was able to find the silver lining in the statistics. Remittance inflows and foreign direct investment (FDI) helped keep the current account balanced. According to reports, businesses in energy and Finance have witnessed a 20 percent growth rate because of FDI.
