Controversy over GDP statistics

[xenia]

Govt adopts novel tactic to project higher growth rate​

By Khaleeq Kiani


ISLAMABAD, May 16: The government has revised current year’s real economic growth rate at 4.1 per cent – much higher than the 3.3 per cent announced earlier – mainly because of a major downward revision in growth and production figures for the last two years.
Informed sources told Dawn on Sunday that last year’s (2008-09) real economic growth (commonly defined as Gross Domestic Product) rate had been revised downwards to a paltry 1.2 per cent from two per cent announced and hitherto acknowledged by the government. Likewise, the real GDP growth rate for 2007-08 has also been brought down to 3.7 per cent from previous estimates of 4.1 per cent.

The revised growth estimates have been compiled on the basis of reconciled data for the last two years and were expected to be approved by a National Accounts Committee (NAC) meeting to be held on Tuesday (May 18). The NAC, comprising federal and provincial economic ministries and agencies, is the highest forum to approve annual economic data and its findings become the basis of next year’s national economic planning and budget making.

“The downward revision in 2008-09 growth estimates has provided a substantial cushion to push up current year’s growth rate (at constant factor cost of 19992000) by about 1.2 percentage points to 4.1 per cent of GDP,” a government official said. He said there was nothing wrong with the upward revision in current year’s growth rate because reduction in last year’s rate was based on actual and reconciled economic figures.

Other major contributors to growth during the current fiscal year were services (60 per cent contribution), followed by industry at 30 per cent and agriculture 10 per cent. In terms of individual sector, manufacturing accounted for 23 per cent of the current year’s overall growth, followed by wholesale and retail trade at 21 per cent and social and community services at 19 per cent.

This is despite the fact that gross fixed capital formation (GFCF) at current market prices has been estimated to have declined by 0.6 per cent after recording a 5.5 per cent increase in 200809. The private sector has accounted for the decline with an estimated contraction of GFCF of 3.5 per cent for the year. The bulk of the decline has happened in electricity, gas, large-scale manufacturing, transport & communication and finance and insurance. General government GFCF is estimated to have increased by 9.8 per cent.

INDUSTRY: The industry recorded a growth rate of 4.90 per cent this year, significantly higher than the targeted 1.7 per cent. The mining and quarrying contracted by 1.7 per cent against a target of 2 per cent increase over the last year. However, manufacturing is estimated to have grown by 5.1 per cent, substantially higher than the 1.8 per cent growth target.

The sources said that large-scale manufacturing grew by 4.3 per cent during the current year against a target of 1 per cent. Small-scale manufacturing, too, increased at the rate of 7.5 per cent, significantly higher than targeted 3 per cent.

SERVICES SECTOR: Another major contribution in higher than the planned growth rate came from services sector this year. The government had set a growth target of 3.9 per cent for services for the outgoing year but this sector is estimated to have improved by 4.56 per cent.

AGRICULTURE: The sources said the agriculture sector growth rate at 2 per cent had remained significantly short of 3.8 per cent target set for the current year. The government had set a growth rate of 3.5 per cent for major crops but it declined by 0.2 per cent. Likewise, output of minor crops reduced by 1.2 per cent against a growth target of 4 per cent while livestock growth rate was recorded at 4.1 per cent against a target of 4 per cent.

This is despite the fact that output of almost all major crops — except cotton — was lower than last year’s production. For example, the wheat output at 23.864 million tons is 0.7 per cent less than 24.033 million tons last year. Cotton output at 12.7 million bales is 7.4 per cent higher than last year’s 11.8 million bales.

Rice production this year at 6.88 million tons is 1 per cent lower than last year’s 6.95 million tons while sugarcane output at 49.4 million tons was 1.3 per cent less than 50.05 million tons last year or 23 per cent less than 64 million tons in 2007-08. Maize production stood at 3.49 million tons against last year’s 3.59 million tons, down by 3 per cent.

Likewise, gram production stood at 571,000 tons against last year’s 741,000 tons, significantly down by 23 per cent. Jowar and Bajra production were also lower by 6.3 per cent and 1.1 per cent respectively.


Dawn ePaper

 

[Hutchroy]

NAC’s estimated growth figures may have been fudged​

ISLAMABAD: The National Accounts Committee is alleged to have estimated a growth figure of 4.1 per cent for the current year by doctoring the estimates for the growth in the construction, livestock and the wholesale and retail sectors, say analysts.

Independent economists in and outside the government are sceptical about the projected 4 per cent growth for the financial year 2009-10. The National Accounts Committee (NAC) has projected that during the current fiscal year the economy would grow by 4.1 per cent, officials had revealed to The Express Tribune on Friday. Independent economists, however, have attributed this extraordinary showing of the Gross Domestic Product (GDP) to “creative accounting.”

The have found out that the government not only played with last year’s GDP growth numbers by revising them downwards but also allegedly fudged the growth numbers of some of the sectors for this fiscal year. It was not for the first time that economists have unearthed such discrepancies. Last year, the National Accounts Committee showed the GDP growth at 2.24 per cent. Only after criticism from economists did the government revise the numbers downwards to 2 per cent.

Economists said that in order to get advantage of the lower base, the government once again revised last year’s 2 per cent growth number to 1.14 per cent. The NAC is to meet on May 18 to discuss provisional growth figures for the outgoing and the final figures of the previous two financial years. The government earlier estimated that that the national output would remain at 3 per cent. Later on, the projection was revised upward to 3.4 per cent but the final figures are a surprise to many.

The IMF and the Asian Development Bank have also forecast less than 3.5 per cent growth for the current financial year. The Incremental Capital Output Ratio concept says that for growth, investment is needed. The NAC document, according to the officials, reported negative 3.5 per cent growth in fixed private investment in nominal terms and negative growth over 15 per cent in real terms .

“With negative growth in fixed private investment, over 4 per cent growth is surprising”, said a Finance Ministry official. According to an economist, who was the one of the main economic managers during the last regime, the NAC has projected 15 per cent growth in the construction sector. “How could there be 15 per cent growth in the construction sector when the public sector spending is less than the last year and no major construction activity is going on”?

The former Finance Ministry official said that 15 per cent growth in the construction sector would boost the economic growth by 0.3 per cent. Another economist, said private construction falls under ownership and dwelling, thus, 15 per cent growth in the construction sector is “out of the question.” Similarly, in the livestock sector the NAC assessed 4.2 per cent growth for the current fiscal year. Historically, growth in the livestock sector never went beyond 3.5 per cent, said the former official, adding, the manipulation in the livestock sector contributed 0.9 per cent in the total national outlook.

According to the provisional estimates of the NAC, the agriculture sector’s growth target was missed for the consecutive second year. This year the agriculture sector grew by 2.2 per cent against the target of 3.8 per cent. In the wholesale and retail sector the NAC has projected 5.1 per cent growth. “More than one-third growth in the wholesale and retail sector is led by growth in imports and with negative growth in imports over 4 per cent growth is astonishing”, said an economist working in the Ministry of Finance.

 

[Creder]

i dont believe jack about what these thieves have to say

 

[pak-yes]

I seriously hate the measure called GDP.

Look Shaukat aziz and Musharraf continuously saying good GDP good GDP no IMF no IMF and as soon as they are gone the paper reality has been shown.

 

[T-Faz]

I seriously hate the measure called GDP.

Look Shaukat aziz and Musharraf continuously saying good GDP good GDP no IMF no IMF and as soon as they are gone the paper reality has been shown.

I do not think you understand how economy works and I do not have the time to go over everything with you.

Let me just say this, during good times, a country takes a much larger loan for development on the presumption that growth will remain high and loan payments met. However if things turn for the worse, your growth nose dives and you default on loan payments.

Thats what happened to Pakistan, WOT spilled over, the judiciary crisis and the barrage of terrorism halted the economy and dried up FDI. We defaulted on our loan payments and IMF bailed us out, nothing to do with fake GDP figures.

We will be back on track in the next few years soon Inshallah.

 

[xenia]

I do not think you understand how economy works and I do not have the time to go over everything with you.

Let me just say this, during good times, a country takes a much larger loan for development on the presumption that growth will remain high and loan payments met. However if things turn for the worse, your growth nose dives and you default on loan payments.

Thats what happened to Pakistan, WOT spilled over, the judiciary crisis and the barrage of terrorism halted the economy and dried up FDI. We defaulted on our loan payments and IMF bailed us out, nothing to do with fake GDP figures.

We will be back on track in the next few years soon Inshallah.

well said!!

 

[pak-yes]

I do not think you understand how economy works and I do not have the time to go over everything with you.

Let me just say this, during good times, a country takes a much larger loan for development on the presumption that growth will remain high and loan payments met. However if things turn for the worse, your growth nose dives and you default on loan payments.

Thats what happened to Pakistan, WOT spilled over, the judiciary crisis and the barrage of terrorism halted the economy and dried up FDI. We defaulted on our loan payments and IMF bailed us out, nothing to do with fake GDP figures.

We will be back on track in the next few years soon Inshallah.

Yes i don't know how economy works.But all i know is that for real growth you need products you need innovation you need factories and Musharraf era hasn't provided us with any of these.

The increase in the GDP of Pakistan during Musharraf era was primarily due to huge foreign inflow of money into Pakistan after 9/11 but perhaps the most important aspect of GDP growth was the Banking system.

All i know is that GDP is just a sum of all the production or economic activity in a country.It however doesn't take into account the type of activity.The activity could be the import of cars or could be the export of weapons.

 

[T-Faz]

Yes i don't know how economy works.But all i know is that for real growth you need products you need innovation you need factories and Musharraf era hasn't provided us with any of these.

The increase in the GDP of Pakistan during Musharraf era was primarily due to huge foreign inflow of money into Pakistan after 9/11 but perhaps the most important aspect of GDP growth was the Banking system.

All i know is that GDP is just a sum of all the production or economic activity in a country.It however doesn't take into account the type of activity.The activity could be the import of cars or could be the export of weapons.

No during Muharrafs era, Telecommunication, Multimedia, fashion and other such industries boomed.

Look here to see the industries that contributed to the economy and it wasn't the aid which was used primarily for military purposes.

South Asia - Doing Business in 2006: South Asian Countries Pick up Reform Pace, says World Bank Group&#59; India Ranks 116th, 25 Places After China&#59; Pakistan Among Top 10 Reformers

 

[pak-yes]

No during Muharrafs era, Telecommunication, Multimedia, fashion and other such industries boomed.

Look here to see the industries that contributed to the economy and it wasn't the aid which was used primarily for military purposes.

South Asia - Doing Business in 2006: South Asian Countries Pick up Reform Pace, says World Bank Group; India Ranks 116th, 25 Places After China; Pakistan Among Top 10 Reformers

lol.ok bhai you win.But i tell you telecommunication and media are not the type of Industries which will take you to Japan's level.They are just one time temporary boosters.

 

[T-Faz]

lol.ok bhai you win.But i tell you telecommunication and media are not the type of Industries which will take you to Japan's level.They are just one time temporary boosters.

Nahi bhai, look here, the IT sector and the telecommunications grew and still have a lot of potential, their continuing success will invigorate other sectors.

Real and Nominal GDP of Pakistan

Japan is an electronic products manufacturer which is on a brink of a disaster because it is under a lot of debt, the debt accumulated on the assumption that their electronics industry will not be challenged and now with multiple competitors, it faces extreme problems

One example, Sony used to to be everywhere in the 80's and 90's, it was a great pioneer in the industry, look where it is today.

Economic crisis looms for Japan amid financial and manufacturing problems - washingtonpost.com

Bhai look at this way, every dog has its day. When someone is on the way up, someone is on the way down and our time will come too.

 

[Neither Right Nor Wrong]

I do not think you understand how economy works and I do not have the time to go over everything with you.

Let me just say this, during good times, a country takes a much larger loan for development on the presumption that growth will remain high and loan payments met. However if things turn for the worse, your growth nose dives and you default on loan payments.

Thats what happened to Pakistan, WOT spilled over, the judiciary crisis and the barrage of terrorism halted the economy and dried up FDI. We defaulted on our loan payments and IMF bailed us out, nothing to do with fake GDP figures.

We will be back on track in the next few years soon Inshallah.

Well technically Pak did not default had it defaulted on its loan payments, it would have bin to both foreign and domestic investment.
Pak had only 45 days reserves left to support the import bill.
Mr Zardari appealed to Int. community to bail them out, Int. community refused to help.

Pak asked Saudi Arabia to defer 5.8 Billion $ oil import bill.

Mr zardari asked China to help pakistan with 2 Billion $, China refused instead pledged to increase the bilateral trade and provide Pak with two nuclear reactors.

As a last resort Pak had to go to IMF, which sanctioned 7.6 billion $ loan on a 23-month Stand-By Arrangement.

Had Pakistan bin late by a month it would have surely defaulted.
And a Sovereign default is equivalent to declaring Bankruptcy.

 

[T-Faz]

Well technically Pak did not default had it defaulted on its loan payments, it would have bin to both foreign and domestic investment.
Pak had only 45 days reserves left to support the import bill.
Mr Zardari appealed to Int. community to bail them out, Int. community refused to help.

Pak asked Saudi Arabia to defer 5.8 Billion $ oil import bill.

Mr zardari asked China to help pakistan with 2 Billion $, China refused instead pledged to increase the bilateral trade and provide Pak with two nuclear reactors.

As a last resort Pak had to go to IMF, which sanctioned 7.6 billion $ loan on a 23-month Stand-By Arrangement.

Had Pakistan bin late by a month it would have surely defaulted.
And a Sovereign default is equivalent to declaring Bankruptcy.

Son we have come close to complete financial meltdown a couple of times before but we keep on going. I know we did not default but the situation was close to complete meltdown. I wrote that to explain to Pak-Yes guy the whole scenario of GDP and the development loan countries sign up to. Here, read this and learn how we stayed alive in the past.

1979-1991: Criminal BCCI Bank Repeatedly Saves Pakistan from Financial Ruin

By 1979, Pakistan’s economy is on the brink of collapse. Pakistan owes large debts to international organizations such as the World Bank and the International Monetary Fund (IMF), but lacks the money to pay off its loans. The criminal BCCI bank led by Agha Hasan Abedi comes up with a scheme to save Pakistan’s economy. In 1979, the IMF says that if Pakistan increases its hard currency reserves by at least $50 million for 90 days, Pakistan’s State Bank can raise the lending limits for commercial banks. With banks able to make more loans, the economy will be able to perform better. BCCI secretly loans the State Bank the hard currency until the 90 days are over and then takes it back. Having established this system, BCCI helps Pakistan’s State Bank numerous times in subsequent years to avoid financial limitations placed on Pakistan. BCCI will finally collapse in 1991 (see July 5, 1991). [BEATY AND GWYNNE, 1993, PP. 292-293]
Entity Tags: Bank of Credit and Commerce International, International Monetary Fund, Pakistan State Bank, World Bank

 

[Hyde]

Son we have come close to complete financial meltdown a couple of times before but we keep on going. I know we did not default but the situation was close to complete meltdown. I wrote that to explain to Pak-Yes guy the whole scenario of GDP and the development loan countries sign up to. Here, read this and learn how we stayed alive in the past.

He is not Son,

He is also uncle like you

and i agree with his post. He just told the historical facts of last year and an year before, Nothing else and true we have reached at this position couple of times before also - that is shameful

 

[T-Faz]

He is not Son,

He is also uncle like you

and i agree with his post. He just told the historical facts of last year and an year before, Nothing else and true we have reached at this position couple of times before also - that is shameful

I am 22 years old yaar, lol. I am no Uncle.

 

[Hyde]

I am 22 years old yaar, lol. I am no Uncle.

i was hoping 23 and how is he your son at such a young age

Joking

Lets get back to topic