WB projectes Pak GDP growth rate 3.8%

The World Bank (WB) portrayed a gloomy picture of Pakistan's economy and said that pertaining energy crises, law and order situation and budget deficit are key challenges for the country’s economic growth.

Question is that that Pakistan which is growing by 2.7 percent annually by population, this economic growth is enough to cater the need of the peoples for getting jobs and prosperity. Pakistani people, who have limited space for getting job oppurtunities and how they will survive. They are not only living without job but also living with lack of education, without social insurance and malnurations.

According to the report “Global Economic Prospects”, the bank said “a weak investment climate, infrastructure gaps, sovereign creditworthiness concerns, and large fiscal deficits continue to pose obstacles to a sustained improvement in investment activity and economic performance”.

The FDI to Pakistan , however, has continued to decline from 2008 reflecting the uncertain security situation, weak growth prospects, and widespread electricity shortages.

“Electricity and gas shortages for the industrial and agricultural sectors, macroeconomic challenges including fiscal  deficits  and  high  inflation, and security uncertainties, have hampered  productive business activities. Mainly as a result of adverse domestic  factors, investment as a share of GDP fell by nearly a third  between the 2007-08 and 2011-12 fiscal years, contributing to Pakistan’s current lackluster growth potential, especially compared with the more than 6 percent average annual GDP  growth  recorded  between  2003-07’ the report said.

The bank said that the  secular decline in investment, unless reversed through sustained improvements in macroeconomic  performance  and  policy credibility as well as addressing  infrastructure gaps, has  negative  implications  for  productive capacity and potential output growth during  the forecast  horizon. Concerted  efforts to address electricity  shortages, a major constraint to growth, would also help to raise  the  sustainable pace of growth.

The bank projected Pakistan’s GDP growth to remain broadly stable at 3.8 percent in the 2012-13 fiscal  year compared with 3.7 percent growth recorded in 2011-12. The GDP growth is projected to remain close to 4 percent during 2014 and 2015, a relatively sluggish  pace compared to regional peers.

Despite efforts at consolidation, fiscal deficits are 6 percent or higher in Pakistan. Subsidies, mainly for fuel and to a lesser extent for food, contribute to the overall deficits subsidies account for over 2 percent of GDP in Pakistan.

The report said that industrial output in Pakistan also picked up sharply in the fist half of the current fiscal year. In Pakistan, notwithstanding domestic security problems and electricity shortages, industrial output picked up to an 12 percent annualized pace in  the  three months  ending  in November, mainly due to robust growth of textile exports. In South Asia only Pakistan is lagging behind in the recovery and the gap with respect to long term trends.

Nevertheless, inflation in the region remains high as it was witnessed close to 10 percent Pakistan , reflecting structural capacity constraints, large fiscal deficits and entrenched inflationary expectations. Headline inflation exceeds 7 percent in Pakistan .

Efforts to bring deficits under control will also need to involve efforts to broaden the tax base, which is extremely narrow in some countries, and to improve compliance in particular, in Pakistan where a very  small percentage of citizens pay income tax as well as to simplify the tax code.

Partly as a result of earlier crude oil price increases, Pakistan’s current account deficit had widened to 2 percent of GDP in the 2011-12  fiscal year, but the release of coalition support  funds and continued robust  pace  of  increase in migrant  remittances helped to reduce Pakistan’s current account deficit  to  0.4  percent  of  GDP in the first five months  of  the 2012-13 fiscal year (July-November period).