Finance ministrys economic outlook: GDP to grow by targeted 7.2%
Saturday, September 29, 2007
By Sajid Chaudhry
ISLAMABAD: The GDP of the country is expected to grow as per its target of 7.2 percent in 2007-08 ably supported by agriculture growth at 4.8 percent and large scale manufacturing growth of 10.5 percent, according to the economic outlook released by the ministry of finance on Friday for the current fiscal year 2007-08.
As regards financing the budget deficit for the current fiscal year 2007-08 is concerned, the government is expecting Rs 29 billion in grants. Therefore, total financing requirement would be Rs 370 billion, of which Rs 220 billion will come from external sources. Within external financing Rs 113 billion is expected as privatisation proceeds. However, remaining Rs 147 billion will come from domestic sources as borrowing.
This economic forecast has not taken into account the political scenario especially the controversy over presidential election, resignation by opposition parties, and worsening law and order situation in the country right from the start of this fiscal year.
In its Asian Development Outlook 2007 Update released last week, the Asian Develo-pment Bank has pointed out that the fundamental issue confronting the economy is the resolution of the current political uncertainty in Pakistan. The bank suggests that the forthcoming presidential and parliamentary elections must be seen by the population as fair, and the continuity and coherence of economic policy should be ensured, so as to sustain economic and governance reforms.
The ADB has projected that GDP growth of the country to be around 6.5 percent against the target of 7.2 percent for the current fiscal year.
On the basis of strong demand, bolstered by increased private and public investment, the economy is seen keeping most of its momentum and will achieve 6.5 percent growth in FY08.
The slight deceleration reflects several factors: the tightening of the monetary policy stance to contain consumer demand; the impact of high international oil prices; continued slow growth in exports, due mainly to greater international competition in the textile sector; and expected slow growth in the US economy (Pakistans largest trading partner) in JulyDecember 2007, the ADB points out.
The ministry has said that economic outlook for the current financial year 2007-08 has been prepared on the basis of healthy macroeconomic indicators, which remain extremely favorable. Building on the same positive trajectory as last year, real GDP growth is expected to increase to 7.2 percent in 2007-08 ably supported by agriculture (4.8 percent) and large scale manufacturing (10.5 percent). Last year overall CPI based inflation averaged 7.8 percent, however inflation for this year has been targeted at 6.5 percent. Investment has also been forecasted to increase to 23.5 percent of GDP as compared to last fiscal years figure of 23.0 percent of GDP. On the external side, current account was enumerated at 4.9 percent of GDP in 2006-07, this year it has been projected to decline to 4.7 percent of GDP. Fiscal deficit on the other hand has been targeted to decline to 4.0 percent of GDP in the ongoing financial year as against 4.3 percent in 2006-07.
The International Monetary Fund (IMF) mission, who concluded its Pakistans annual Article IV Consultations on September 20, 2007, has projected that the prospects for sustained high growth in 2007-08 and over the medium term remain favorable, as macroeconomic stability and market-oriented reforms further take hold.
In light of current uncertainties in global financial markets, the IMF mission stressed the need for very prudent macroeconomic policies in 2007-08.
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