ISLAMABAD:
The government on Wednesday approved a 5.7% economic growth rate for the last quarter of the previous fiscal year on the back of a 20% increase in output of the industrial sector, which everyone believes is badly suffering because of tight economic conditions.
The surprising results suggest that Pakistan’s economy can still achieve 6% growth without fixing underlying structural weaknesses and despite double-digit interest rates, tight fiscal and monetary policies and higher taxes and energy tariffs compared to regional economies.
The growth figures, which the National Accounts Committee (NAC) approved on Wednesday, showed some abnormal trends and major revisions in quarterly numbers as well. Secretary Planning Awais Manzur Sumra chaired the NAC meeting.
NAC approved a 5.7% growth rate for April-June quarter, compared to only 2.8% growth in the preceding quarter, according to figures released by the Pakistan Bureau of Statistics (PBS) after the NAC meeting.
The NAC sitting was held two days after disclosure that the PBS had underreported imports for the last two fiscal years to the tune of $11 billion due to non-booking of some imports by the Pakistan Revenue Automation Limited.
The sudden economic recovery also jacked up the annual economic growth for fiscal year 2024-25, which was increased from 2.7% to slightly above 3%.
Sources said that a few members of the NAC pointed out inconsistencies in the output of the construction sector and allied industries. They also highlighted issues with the growth in electricity, the unusual increase in the output of minor crops and variations in the quarterly growth figures, the sources said.
According to the provisional results, the industrial sector posted a ‘remarkable’ growth of 20% in the fourth quarter of FY25, compared to a nominal growth of 1.2% in the preceding quarter. This pushed the quarterly economic growth to 5.7%.
The NAC approved a 121.4% growth in electricity, gas and water supply sectors in the April-June quarter compared to 4% contraction during the earlier three months.
The government has long been complaining about a drastic reduction in electricity demand from residential consumers due to high prices and the industrial sector was also forced to switch to the national grid because of the same reason.
The PBS said that the reason behind the 121.4% growth in electricity generation was a “higher subsidy as compared to the fourth quarter of last year as well as the effect of deflator”.
The NAC approved a 17.7% growth in the construction industry in the fourth quarter compared to 10.7% in the preceding quarter. Construction is one of the sectors that have been adversely affected by the government’s taxation policies, higher interest rates and the overall economic slowdown.
The results of the fourth quarter negate the perception that Pakistan’s economy is suffering because of a weak structure. If the figures are correct, it suggests that Pakistan can grow at the rate of 6% despite the fiscal consolidation programme of the International Monetary Fund.
Details showed that the mining & quarrying industry posted a growth of 1.94% in the fourth quarter compared to a contraction of 2.9% in the preceding quarter “due to increase in production of limestone and marble”.
Likewise, the large-scale manufacturing, which was constantly shrinking in the first three quarters of FY25, suddenly grew 3% in the last quarter, according to the NAC working paper.
Annual revision
The PBS stated that the annual economic growth for fiscal year 2024-25 was being revised upwards to 3.04% after the availability of complete data. Earlier, in June, the government had reported a 2.7% growth, which had been met with suspicion by the independent economists. They had worked out that it would require a 5.7% growth to achieve the 2.7% rate.
The NAC revised upwards the growth rate for the agriculture sector from 0.56% to 1.5% for the last fiscal year. The industrial sector growth was revised from 4.8% to 5.3% and the services sector was shown growing at 3%.
Agriculture sector
The PBS stated that the contraction in important crops was slightly less than reported in June. But the reason behind the claimed 1.51% growth in the agriculture sector was a sudden expansion in minor crops, whose provisional 4.8% growth was revised to 19.6%. It is one of the sharpest upward revisions.
The official reason for the growth in minor crops was the “positive output in green fodder”, which was shown growing by 16% in the last fiscal year. However, the PBS said that livestock growth decreased from 4.7% to 2.94%, because of increase in intermediate consumption of the green fodder.
Industry
The government also approved major upward adjustments in the industrial sector. It reduced the contraction in the mining & quarrying industry from 3.4%, reported in June, to 2.4%. On an annual basis, the electricity, gas and water supply industry was shown growing by 28.53%.
How it was achieved
The NAC also approved revisions in the economic growth numbers of the first three quarters. Compared to the 1.4% growth approved for the first quarter earlier, the NAC increased it to 1.8%. Likewise, the second quarter growth was revised upwards from 1.53% to 1.94% and the third quarter growth was revised from 2.4% to 2.8%.
The growth in the agriculture sector was revised from 0.8% to 1.6% and for the second quarter from 0.8% to 2%. A major revision was made in the third quarter, where the growth was increased from 1.2% to 2.4%. The PBS stated that once the annual figures are available, the quarterly estimates for all the four quarters are adjusted.
