Friday, December 15, 2006
Pakistan GDP may pick up in 2007: WB
By Sajid Chaudhry
ISLAMABAD: Neither fiscal nor monetary policy is likely to turn restrictive in the run-up to the 2007 presidential election in Pakistan. As a result, GDP in Pakistan is expected to pick up in 2007, bolstered by an increase in agricultural production and increased capacity following government infrastructure investment and private sector investments in the textile sector.
The growth is expected to tail off in 2008 as more restrictive macroeconomic policies begin to restrain domestic demand, according to the Global Economic Prospects 2007, a World Bank report entitled ââ¬Åmanaging the new wave of globalizationââ¬Â released on Thursday. International tensions on Pakistanââ¬â¢s borders generate instability and reduce investor confidence, acting as drag on growth, particularly of investment. Political tensions, both domestic and external, also pose risk.
Real GDP in South Asia is projected to slow down gradually from 8.2% in 2006 to a still robust 7% in 2008. This projection assumes a modest tightening of fiscal policy over the next two years, following several years during which increased subsidy spending on heavy fuel and heating oil kept budget deficit elevated despite rapid growth and rising revenues. A notable exception is Pakistan where higher deficit are anticipated because of earthquake reconstruction efforts and subsidies. The stance of the monetary policy in the region is also expected to tighten and higher borrowing costs should cause investment growth to slow down to single-digit rates in 2008.
Most vulnerable are countries such as Pakistan, where the current account deficit and budget deficit are large (both projected at 4% or more of GDP for 2006) and hard currency reserves are relatively low (with import cover down to 3.5 months in 2006 from nine months in 2003).
Higher-than-anticipated international oil price due to a significant interruption of supply also are an important risk for the South Asia region. Higher prices would have direct impact on inflation, the current account deficit and the government balance because of increased government spending on fuel subsidies. At the same time, reduced exports due to slower global growth would weaken government revenues and export earnings, thereby exacerbating direct impact on government and current account deficit. A simultaneous rise in both fiscal as well as current imbalance could undermine the perceived credit worthiness of the countries in South Asia region resulting in significantly higher interest rates that could undermine growth prospects.
According to the Global Economic Prospects 2007 Managing the Next Wave of Globalization, globalization could spur faster growth in average incomes in the next 25 years than during 1980-2005, with developing countries playing a central role. However, unless managed carefully, it could be accompanied by growing income inequality and potentially severe environmental pressures, predicts the World Bank.
Growth in developing countries will reach a near record seven percent this year. In 2007 and 2008, growth will probably slow down, but is still likely to exceed six percent, more than twice the rate in high-income countries, which is expected to be 2.6 percent.
GDP in South Asia is estimated to have expanded at a very rapid pace of 8.2 percent in 2006. Output in Pakistan is estimated to have slowed down from 7.8 to 6.6 percent, following a return to more normal agricultural production in the wake of a bumper harvest in 2005.
The report predicts that globalization will expand the global economy from $35 trillion in 2005 to $72 trillion in 2030. ââ¬ÅWhile this outcome represent only a slight acceleration of global growth compared with the past 25 years, it is driven more than ever before by strong performance in developing countries,ââ¬Â said Richard Newfarmer, the reportââ¬â¢s lead author and economic adviser in the trade department. ââ¬ÅAnd while exact numbers will undoubtedly turn out to be different, the underlying trends are relatively impervious to all but the most severe or disruptive shocks.ââ¬Â
Broad-based growth in developing countries sustained over the period would significantly affect global poverty. ââ¬ÅThe number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030. However, some regions, notably Africa, are at risk of being left behind. Moreover, income inequality could widen within many countries, compounding current concerns over inequality between countries,ââ¬Â said Francois Bourguignon, World Bank Chief Economist and Senior Vice- President, Development Economics.
Global trade in goods and services could rise more than threefold to $27 trillion in 2030, and trade as a share of the global economy will rise from one-quarter today to more than one-third. Roughly half of the increase is likely to come from developing countries. Developing countries that only two decades ago provided 14 percent of manufactured imports of rich countries, today supply 40 percent, and by 2030 are likely to supply over 65 percent. At the same time, import demand from developing countries is emerging as a locomotive of the global economy.
Globalization is likely to bring benefits to many. By 2030, 1.2 billion people in developing countries -15 percent of the world population- will belong to the ââ¬Åglobal middle class,ââ¬Â up from 400 million today. This group will have a purchasing power of between $4,000 and $17,000 per capita, and will enjoy access to international travel, purchase automobiles and other advanced consumer durables, attain international levels of education, and play a major role in shaping policies and institutions in their own countries and the world economy.
http://www.dailytimes.com.pk/default.asp?page=2006\12\15\story_15-12-2006_pg5_12
Pakistan GDP may pick up in 2007: WB
By Sajid Chaudhry
ISLAMABAD: Neither fiscal nor monetary policy is likely to turn restrictive in the run-up to the 2007 presidential election in Pakistan. As a result, GDP in Pakistan is expected to pick up in 2007, bolstered by an increase in agricultural production and increased capacity following government infrastructure investment and private sector investments in the textile sector.
The growth is expected to tail off in 2008 as more restrictive macroeconomic policies begin to restrain domestic demand, according to the Global Economic Prospects 2007, a World Bank report entitled ââ¬Åmanaging the new wave of globalizationââ¬Â released on Thursday. International tensions on Pakistanââ¬â¢s borders generate instability and reduce investor confidence, acting as drag on growth, particularly of investment. Political tensions, both domestic and external, also pose risk.
Real GDP in South Asia is projected to slow down gradually from 8.2% in 2006 to a still robust 7% in 2008. This projection assumes a modest tightening of fiscal policy over the next two years, following several years during which increased subsidy spending on heavy fuel and heating oil kept budget deficit elevated despite rapid growth and rising revenues. A notable exception is Pakistan where higher deficit are anticipated because of earthquake reconstruction efforts and subsidies. The stance of the monetary policy in the region is also expected to tighten and higher borrowing costs should cause investment growth to slow down to single-digit rates in 2008.
Most vulnerable are countries such as Pakistan, where the current account deficit and budget deficit are large (both projected at 4% or more of GDP for 2006) and hard currency reserves are relatively low (with import cover down to 3.5 months in 2006 from nine months in 2003).
Higher-than-anticipated international oil price due to a significant interruption of supply also are an important risk for the South Asia region. Higher prices would have direct impact on inflation, the current account deficit and the government balance because of increased government spending on fuel subsidies. At the same time, reduced exports due to slower global growth would weaken government revenues and export earnings, thereby exacerbating direct impact on government and current account deficit. A simultaneous rise in both fiscal as well as current imbalance could undermine the perceived credit worthiness of the countries in South Asia region resulting in significantly higher interest rates that could undermine growth prospects.
According to the Global Economic Prospects 2007 Managing the Next Wave of Globalization, globalization could spur faster growth in average incomes in the next 25 years than during 1980-2005, with developing countries playing a central role. However, unless managed carefully, it could be accompanied by growing income inequality and potentially severe environmental pressures, predicts the World Bank.
Growth in developing countries will reach a near record seven percent this year. In 2007 and 2008, growth will probably slow down, but is still likely to exceed six percent, more than twice the rate in high-income countries, which is expected to be 2.6 percent.
GDP in South Asia is estimated to have expanded at a very rapid pace of 8.2 percent in 2006. Output in Pakistan is estimated to have slowed down from 7.8 to 6.6 percent, following a return to more normal agricultural production in the wake of a bumper harvest in 2005.
The report predicts that globalization will expand the global economy from $35 trillion in 2005 to $72 trillion in 2030. ââ¬ÅWhile this outcome represent only a slight acceleration of global growth compared with the past 25 years, it is driven more than ever before by strong performance in developing countries,ââ¬Â said Richard Newfarmer, the reportââ¬â¢s lead author and economic adviser in the trade department. ââ¬ÅAnd while exact numbers will undoubtedly turn out to be different, the underlying trends are relatively impervious to all but the most severe or disruptive shocks.ââ¬Â
Broad-based growth in developing countries sustained over the period would significantly affect global poverty. ââ¬ÅThe number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030. However, some regions, notably Africa, are at risk of being left behind. Moreover, income inequality could widen within many countries, compounding current concerns over inequality between countries,ââ¬Â said Francois Bourguignon, World Bank Chief Economist and Senior Vice- President, Development Economics.
Global trade in goods and services could rise more than threefold to $27 trillion in 2030, and trade as a share of the global economy will rise from one-quarter today to more than one-third. Roughly half of the increase is likely to come from developing countries. Developing countries that only two decades ago provided 14 percent of manufactured imports of rich countries, today supply 40 percent, and by 2030 are likely to supply over 65 percent. At the same time, import demand from developing countries is emerging as a locomotive of the global economy.
Globalization is likely to bring benefits to many. By 2030, 1.2 billion people in developing countries -15 percent of the world population- will belong to the ââ¬Åglobal middle class,ââ¬Â up from 400 million today. This group will have a purchasing power of between $4,000 and $17,000 per capita, and will enjoy access to international travel, purchase automobiles and other advanced consumer durables, attain international levels of education, and play a major role in shaping policies and institutions in their own countries and the world economy.
http://www.dailytimes.com.pk/default.asp?page=2006\12\15\story_15-12-2006_pg5_12
