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How realistic is the forecast that Pakistan will be world’s sixth-largest economy by 2075?

Abid123

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If the population increases without commensurate growth in GDP, the quality of life will not improve and economic collapse could ensue.

Will Pakistan be the sixth-largest world economy by 2075? The “Path to 2075”, a paper issued by Goldman Sachs earlier this month, says yes.

According to the paper, China will rank first, followed by India, the United States, Indonesia and Nigeria. As a point of reference, the US National Intelligence Council, citing Oxford Economics, predicts that by 2040, India’s economy will rank 3rd, China’s 1st and Pakistan’s 23rd.

Using a popular macroeconomic model, the Goldman Sachs paper predicts the economic outlook for 104 countries. It updates an analysis that was published in 2003 which was limited to the BRICS (Brazil-Russia-India-China-South Africa) economies and a subsequent study that expanded it to 70 countries.


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Being the sixth-largest economy in the world would represent a massive change of fortunes for Pakistan, which has been struggling with economic growth for the past several decades. But how realistic is this forecast?

The paper comes with an important caveat: “The risks involved in projecting far into the future remain substantial.” The authors, Kevin Daly and Tadas Gedminas, acknowledge that the forecasts they made 10 years ago were overly optimistic, since economic growth ran into headwinds, especially for Russia, Brazil and Latin America. They say the contents should not be viewed as a forecast per se, but more as a guide on how global dynamics may evolve across countries.

They state that short-term forecasts are affected by business cycles and events such as the Covid-19 pandemic which are difficult to predict. Thus, they focus on long-term trends but do indicate that “populist nationalism”, a slowdown in the rate of technological progress and climate change pose significant risks.

Their forecast is primarily driven by growth in population and productivity. Population projections are usually not controversial. They are based on factors such as the birth rate, life expectancy, and the percentage of the population that is working.

Since populations are aging in the Asian Tigers, their ranking in the economic forecast begins to diminish. For example, the Philippines moves ahead of South Korea.

The problem with the forecast​

When all is said and done, the Goldman Sachs methodology is based on projecting past trends. No error bands are presented. No scenarios are created to account for structural uncertainties in their model. No allowance is made for disruptive events.

Scenarios allow the forecaster to capture uncertainties in the model structure. Each scenario represents a different state of the world, not just different outcomes in the same world. In Pakistan’s case, the biggest uncertainty is political, both domestic and international. When Pakistan was created in 1947, no one could have forecasted that the nation would split into two less than 25 years later. In fact, in the early 60s, then-US national security adviser Walt Rostow said Pakistan’s economy was poised to take off. Then came the war with India in 1965, which unleashed a political upheaval that led to the imposition of a second martial law.

Pakistan’s history has alternated between military and civilian rule. It has fought three major wars and several minor ones with India. The Kashmir issue has still not been resolved. Both countries are engaged in an arms race which, since 1998, also includes nuclear weapons.

Finally, since the Soviet invasion of Afghanistan in 1979, Pakistan has experienced bouts of terrorism. Even when terrorism is not active, the body politic is riven with controversies arising from the injection of religion into politics.

The Goldman Sachs paper does not address these underlying uncertainties and should be taken with caution. In December 2000, a report prepared by the US National Intelligence Council stated that Pakistan faced multiple challenges: “political and economic mismanagement, divisive policies, lawlessness, corruption and ethnic friction”. Twenty-two years later, these continue to cloud the country’s economic future.

Different scenarios​

Several scenarios can be imagined for Pakistan. On one end, there is a “super high-performance” scenario where the country acquires the characteristics of the Asian Tigers. To do that, it would have to raise its investment rate, boost exports, reduce foreign debt, create a budget surplus, and lower defence spending. It would have to liberalise the economy with significant incentives for private enterprise and a modicum of red tape, have a booming tech sector and domestic harmony, and become part of a free trade zone in South Asia.

On the other end is a “super low-performance” scenario, where Pakistan would resemble Afghanistan, Sudan or most of sub-Saharan Africa. There would be no growth in gross national product. Per capita income would decrease by three per cent a year. Poverty levels would be in excess of 80pc, and public services would be dysfunctional. The military would disintegrate into rival militias, each headed by a senior military commander-turned-warlord. There would be no semblance of law and order in either urban or rural areas. Special interest groups would bring political decision-making to a halt. Leaders of tribes, clans, and sects would demand absolute loyalty. There would be extreme inequalities of income and no respect for women and minorities.

In between these scenarios, however, a “status quo” scenario can be imagined.

Disruptive events​

Compounding the uncertainties, Pakistan can experience disruptive events. These have a very low probability of occurrence but
a very large impact. Disruptive events — such as this year’s Russian invasion of Ukraine, the Covid pandemic, the fall of the Berlin Wall in 1989, or the Arab Oil Embargo of 1974 — should be factored into any forecast, especially one that runs half a century out.

Extremely disruptive events based on geopolitical developments, such as the following hypothetical ones, can precipitate a crisis for Pakistan.

- A crisis unfolds tied to the East Turkestan Islamic Movement (ETIM) which demands Pakistan to side with it and threatens retaliation in case of non-compliance.

- India’s unprecedented military expansion causes all of its neighbours to band together, forming a ring around her. Ultimately, it responds by attacking Pakistan, leading to a full-scale war between the two nuclear powers. The threat of nuclear war between Pakistan and India exists, especially over territorial conflicts involving Kashmir, which has been a flashpoint between the two countries for over seven decades now

- Inter-provincial disputes in Pakistan over the allocation of increasingly scarce water and energy resources spin out of control. The military seeks to restore the writ of the federal government in the smaller provinces by launching a sustained counter-insurgency campaign. A war of attrition sets in.

None of these disruptive events, admittedly worst-case scenarios, or the highly complex regional politics are taken into account in the Goldman Sachs paper, whose projections are largely driven by population growth. Since Pakistan’s population grows faster than most countries, that allows it to become the sixth-largest economy by 2075. However, if the population grows without commensurate or faster growth in GDP, the quality of life will not improve and economic collapse could ensue.

In my career as an economist, I learned three things about forecasting: forecasts are nearly always wrong, one should avoid making point forecasts, and always discuss the uncertainties in the forecast and present scenarios.

It’s best to regard Goldman Sachs’ projection as a super high-performance scenario, a best case, which will be realised if Pakistan achieves internal and external harmony, resolves its fiscal and trade deficits, pays off its debt, ends the arms race with India, and becomes a tech-intensive, export-focused economy. Such a utopia was envisioned by Nadeemul Haque in his book Looking Back: How Pakistan became an Asian Tiger.

It is the opposite of the cases laid out by Daron Acemoglu and James Robinson in their book Why Nations Fail. They point out that even China is not immune to failure. Despite its rapid rate of growth, if it does not improve its political balance, China could collapse at some point like the Soviet Union did in the early 1990s.

Pakistan has always had a lot of potential for economic growth. Currently, however, it is trailing both India and Bangladesh in the subcontinent. For it to get ahead of Bangladesh, it will have to do a lot more than simply grow its population at a faster rate. The realisation of high performance scenarios will require not only institutional reform but also a change in the strategic culture of the country.

Source: https://www.dawn.com/news/1727346/h...-will-be-worlds-sixth-largest-economy-by-2075
 

AlKardai

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If we listen to goldman sachs’ prediction we will be the 6th largest economy by 2075

However, if we apply common sense, we will actually find out that we’ll be far from it
 

Abid123

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If we listen to goldman sachs’ prediction we will be the 6th largest economy by 2075

However, if we apply common sense, we will actually find out that we’ll be far from it
If appropriate policies and institutions are in place what will stop us? We will have a population of 450 million by 2075.
 

hussain0216

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Look Pakistan is a economy waiting to rise

Our population makes us the 5th biggest population/market in the world

We have undeveloped resources, a underused middle class, good geo strategic position

The problem is we have been like this for ages, out politicians are useless


They don't want the status quo rocked, and we have ethnocentric stupidity and backwardness that we need to overcome



As soon as we have some stable governance away from the usual Bhutto, sharif trash things will change for Pakistan


Pakistan will grow quickly, even our debt now is relatively low compared to other nations


What we need to do is ensure we keep our enemy in India, away from our economy
 

AlKardai

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Look Pakistan is a economy waiting to rise

Our population makes us the 5th biggest population/market in the world

We have undeveloped resources, a underused middle class, good geo strategic position

The problem is we have been like this for ages, out politicians are useless


They don't want the status quo rocked, and we have ethnocentric stupidity and backwardness that we need to overcome



As soon as we have some stable governance away from the usual Bhutto, sharif trash things will change for Pakistan


Pakistan will grow quickly, even our debt now is relatively low compared to other nations


What we need to do is ensure we keep our enemy in India, away from our economy
Definitely. We also need to keep the thieves away from looting the economy and to allow true Patriots to rise to the ranks they deserve
 

epebble

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How accurately could one have predicted Pakistan's economy today in January 1971? I would say not very well. Too many things happened in the world between 1971 to now that were unpredictable. Same will happen between now till 2075.
 

hussain0216

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Definitely. We also need to keep the thieves away from looting the economy and to allow true Patriots to rise to the ranks they deserve

The problem is that doesn't happen, hence our situation

Look at the current mess, last four years spent trying to undermine IK just so we could get Sharif's , Bhutto's and that idiot Dar back to create havoc


How exactly is Pakistan supposed to improve with these jahils
 

AlKardai

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The problem is that doesn't happen, hence our situation

Look at the current mess, last four years spent trying to undermine IK just so we could get Sharif's , Bhutto's and that idiot Dar back to create havoc


How exactly is Pakistan supposed to improve with these jahils

I don't know whether the estab has thought this through. Even they don't benefit much by having the Sharif Mafia in charge
 

SoulSpokesman

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It is a fully plausible scenario- unless Pak leadership and the society as a whole does something really stupid-, more or less this will pan out as per report. Pak should be getting there. Let us not forget that for most of independent history PAK has been ahead of IND and BD.

Regards
 

Mujahid Memon

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Being 6th largest economy is not an achievement when you have 3rd largest population. In short we will be another India boasting of Lumber 3 but half pop living below poverty line
 

Indos

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I see too much population will be burden. Pakistan land is not as vast as Russia and dont have huge gas or oil like Russia. USA number three largest population also has huge land, huge oil, gas, coal production. Better dont dream about having 750 million people, that will be burden.

750 million people needs many resources, water, farming, energy, land, etc. If Pakistan cannot afford it to get those things domestically, then Pakistan needs to import those thing I mentioned that make the country gets more fragile.

Rather than trying to achieve greater GDP with population increase, why dont concentrate on improving country economy complexity index ?

Current population is already enough to boost economic growth if the politics and economy are properly managed. Why look on India /China ? Why dont see USA (331 million people), Japan (121 million people) or German (83 million people) as economic models ?
 
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Abid123

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I see too much population will be burden. Pakistan land is not as vast as Russia and dont have huge gas or oil like Russia. USA number three largest population also has huge land, huge oil, gas, coal production. Better dont dream about having 750 million people, that will be burden.

750 million people needs many resources, water, farming, energy, land, etc. If Pakistan cannot afford it to get those things domestically, then Pakistan needs to import those thing I mentioned that make the country gets more fragile.

Rather than trying to achieve greater GDP with population increase, why dont concentrate on improving country economy complexity index ?

Current population is already enough to boost economic growth if the politics and economy are properly managed. Why look on India /China ? Why dont see USA (331 million people), Japan (121 million people) or German (83 million people) as economic models ?
Pakistan population by the end of this century will be close to 500 million people.

This is a real concern and we need to find a solution to this. Pakistan is not a atheist state like China so we can't implement a "one child policy". Forget "one child policy" we can't even have 2 or 3 child policy.

The mullahs will be going crazy saying that "family planning" is haram and lots of children is a blessing from Allah.
 

AlKardai

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Pakistan population by the end of this century will be close to 500 million people.

This is a real concern and we need to find a solution to this. Pakistan is not a atheist state like China so we can't implement a "one child policy". Forget "one child policy" we can't even have 2 or 3 child policy.

The mullahs will be going crazy saying that "family planning" is haram and lots of children is a blessing from Allah.

Family planning is the way forward.
 

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