Published Date: May 15, 2015
Pakistan’s economy growing despite macroeconomic imbalances
Islamabad-United Nations’ Economic and Social Survey of Asia and the Pacific 2015 (ESCAP 2015) has predicted that Pakistani economic growth is expected to improve in the coming years, partly due to Government’s major efforts to address electricity shortages and other infrastructural bottlenecks. However, there is urgent need to make this growth more inclusive and broad-based by spreading its benefits to all parts of the country and segments of society” stated the ESCAP 2015 was luanched here by former Chief, ESCAP Macroeconomic, Policy and Analysis Section Dr. Muhammad Hussain Malik,
Dean School of Social Sciences at NUST Professor Ashfaque Hasan Khan and Executive Director, Sustainable Development Policy Institute (SDPI) Dr. Abid Qaiyum Suleri along with dozens of economists were also present on the occasion. The survey titled Making Growth More Inclusive for Sustainable Development showed that Pakistani economy expanded by 4.1% in 2014, a slight pickup from the average growth rate of 3.7% in the preceding three years. Declining inflation, relatively better growth in private sector credit and robust workers’ remittances helped propel consumer spending.
The salient features of the ESCAP 2015 stated that the settlement of the Government’s overdue payments to independent power producers also contributed to a more favourable macroeconomic environment, although overdue payments recently increased again. More modest price pressure led to a policy rate cut in November 2014 followed by another cut in January 2015. Market confidence in Pakistan’s outlook seems to have improved. In April 2014, the country issued sovereign bonds in international markets for the first time in seven years. The over subscription of the $2 billion in bonds was in part due to the high interest rate offered and the abundant liquidity available in international markets.
The growth outlook is forecast to be favourable at 5.1% in 2015 and 4.8% in 2016. Expected growth acceleration in 2015 would be mainly due to the expected pickup in industrial activity. The economy will still be constrained, however, by macroeconomic imbalances. Persistently high fiscal deficits, financed by borrowings from the banking system, have crowded out private investment and added to inflationary pressure. Similarly, supply-side constraints, such as poor domestic security conditions, unfriendly investment climate and severe power shortages, remain in place.