Pakistan Will Get High Economic Growth

[EagleEyes]

According to this report, Pakistan has significantly improved its economic status in the last two decades, but the report says that due to high oil prices, strong domestic demands, the inflation has risen sharply.

The increase of inflation in Pakistan is very bad thing. If we will try to improve the inflation rate in our country. The economic growth will drasticly decrease, because more of the money will go in different parts to decrease the inflation rate.

The report also says that due to better relations with India, the economy has also improved. In my opinon, if the war in Waziristan stops as soon as possible it will positively effect on Pakistan economy, but however i am sure that war effort cost do get provided by United States.

Pakistan to sustain high economic growth in current fiscal: ADB

ISLAMABAD, Oct 05 : The Asian Development Bank (ADB) while appreciating Pakistan’s improved economic performance during FY 2004-05 has predicted that country will sustain high economic growth in the current fiscal.

"Sound macroeconomic fundamentals, increasing private investment and expanding development expenditure will sustain high economic growth in FY 2006," according to the Pakistan Economic Update released by the ADB here.

The present Economic Update prepared by the Pakistan Resident Mission of the ADB provides an analysis of macroeconomic developments in FY 2005 along with the outlook for FY 2006 and reviews poverty-related expenditures in the first three quarters of FY 2005.

According to the report, Pakistan’s economic performance improved in FY 2005 and the economy achieved the highest growth in the last two decades. However, because of shortages of essential food items, high oil prices, and strong domestic demand, inflation increased sharply.

The fiscal deficit also increased, and the current account of the balance of payments turned into deficit after three years.

The bank’s outlook for Pakistan predicts that the economy is projected to grow by 6.5 per cent in FY 2006. The report said that after growing at very high rates in the last two years, the manufacturing sector is expected to settle down to a more sustainable, but still robust, growth of about 11.0 per cent in FY 2006. Substantial production capacity built in the last two years will come online during the year, and the exemption of major export industries from GST will also boost production.

Agricultural growth is also likely to decline in FY 2006, mainly because of the high base effect. It will be difficult to sustain the last year’s all-time high output of cotton because of heavy monsoon rains and greater moisture that increase crop vulnerability to pests. The growth of the agriculture sector is projected at about 3.0 per cent in FY 2006.

In the services sector, the rapid growth of telecom services, banking, and trade is likely to be sustained in FY 2006. Tightening of monetary policy since the last quarter of FY 2005 and opening up of imports of essential food items will dampen inflationary pressures in FY 2006.

However, expansionary fiscal policy, continued high oil prices, and the large monetary overhang may make it difficult to reduce inflation significantly. Hence inflation is projected to decline only marginally to 8.5 per cent in FY 2006. With high GDP growth, projected double-digit increase in imports, and ongoing improvements in tax administration, tax revenues are projected to grow by 17 per cent in FY 2006. However, large increases planned in development expenditure and in salaries and pensions of the government servants, will contribute to a higher fiscal deficit in FY 2006.

Imports are projected to grow at a double-digit rate of about 18 per cent in FY 2006 because of continuing high GDP growth rate and high oil prices. Exports are expected to benefit from liberal incentives for export industries announced in the budget, the textile industry’s restructuring and modernisation and the end of textile quotas since January 2005.

However, because of the expected slow down of the global economy, export growth will decelerate to about 15 per cent and the trade deficit will widen to about $5.8 billion. This, along with expected increase in the deficit on the services account, will result in an increase in the current account deficit to about 2.8 per cent of the GDP.

With sound macroeconomic fundamentals, pick up in private investment, and expanding development expenditure, medium-term prospects for the Pakistan economy look good. Improved relations with India and possible increase in bilateral trade will also boost growth in the medium term.

Reduction of external security concerns in the region is also likely to promote foreign investment. Thus for medium term, it is projected that the high economic growth will be sustained, inflation will come down, the fiscal deficit will remain below 4.0 per cent of the GDP, and the current account deficit will be in the range of at 2.5-3.0 per cent of the GDP, the report added.

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