What led to surprise growth in Pakistan economy in FY 2021
ISLAMABAD - Due to the government’s focus on certain targeted sectors such as housing, agriculture, industry, construction and exports, higher economic growth was recorded along with stabilization during the current fiscal year (2020-21), according to monthly Economic Update and Outlook for May 2021.
“It is expected that in coming years the economy will have sustainable and inclusive growth for everyone through government initiatives for utilizing bottom-up approach,” it added.
The rebound in economic activity was a sign of recovery from sharp output contractions, and was on display around the world. For Pakistan’s economy, growth of 3.94 percent FY2021 would bring sustainably in both the short as well as long-run, thus bringing better prospects of economic growth outlook.
The sectors that contributed in growth included agriculture sector, which grew by 2.8 percent during Fiscal Year 2021 as crops have witnessed a growth of 2.5 percent because of significant growth of 4.7 percent in important crops.
Wheat production grew to 27.3 million tons, maize, 8.5 million tons, rice 8.4 million tons and sugarcane 81.0 million tons, showing growth of 8.1 percent, 7.4 percent, 13.6 percent and 22.0 percent respectively.
However, cotton production dropped by 22.8 percent (7.1 million bales) as compared to last year. Other crops recorded growth of 1.4 percent mainly because of an increase in production of oil seeds and green fodder while the Livestock sector has shown a growth of 3.1 percent. The outlook of agriculture sector is encouraging on the basis of an uptick in inputs utilization.
According to the report, the Large Scale Manufacturing (LSM) production has bounced back in March FY2021, witnessing 22.4 percent growth on a Year-on-Year basis compared to negative 21.7 percent in March FY 2020. During July-March FY 2021, LSM grew by 8.9 percent compared to negative growth of 5.1 percent last year.
The Consumer Price Index (CPI)-based inflation increased by 11.1 percent on a YoY basis in April 2021 as compared to an increase of 8.5 percent in April 2020, mainly due to an increase in prices of food items and clothing and footwear. On average it was recorded at 8.6 percent in the first ten months of the current fiscal year as against 11.2 percent during July-April FY 2020.
The fiscal deficit during July-March, FY2021 was contained at 3.5percent of GDP against 4.1 percent of GDP (revised) in the comparable period of FY2020. Similarly, the primary balance posted a surplus of Rs451.8 billion (0.9 percent of GDP) during July-March, FY2021 against the surplus of Rs193.5 billion (0.5 percent of GDP) in the same period of FY2020.
Total revenues grew by 6.5 percent to Rs4,992.6 billion in July-March, FY2021 against Rs4,689.9 billion in the comparable period of last year. Within revenues, tax collection increased by 11.9 percent to Rs 3,765.0 billion during July-March, FY2021 against Rs 3,365.5 billion in the same period of FY 2020. Total expenditures grew by 4.2 percent during July-March,FY 2021 to Rs 6,644.6 billion against Rs 6,376.1 billion in the comparable period of last year
The provisional net revenue collection by FBR grew by 14.4 percent to Rs 3780 billion during July-April, FY 2021 compared to Rs 3,303 billion last year, surpassing the target of Rs 3,637 billion.
During 01st July to April 30 FY 2021 Money Supply (M2) increased by Rs 1,664.8 billion (growth of 8.0 percent) as compared to an expansion of Rs 1,698.1 billion (growth of 9.5 percent) last year.
On Assets side, Net Foreign Assets (NFA) of the banking system observed expansion of Rs 950.2 billion (Rs 931.1 billion last year), on account of improved external sector position. Whereas, Net Domestic Assets (NDA) increased by Rs 714.6 billion (Rs 767.0 billion last year). Within NDA, Private sector credit observed significant expansion of Rs 454.5 billion as compared to Rs 318.5 billion last year.
On account of 29.0 percent growth in workers’ remittances and 6.5 percent growth in exports, the current account posted a surplus of $ 773 million (0.3 percent of GDP) for July-April FY2021.
It is worth mentioning that exports were recorded $ 2.3 billion in April 2021 ($ 1.4 billion last year) thus posting a growth of 61.3 percent YoY basis. As per PBS, during July–April, FY 2021, exports increased by 13.6 percent to $ 20.9 billion ($ 18.4 billion last year).
The total imports in July-April FY2021 increased to $ 44.7 billion ($ 38.0 billion last year), thus posted 17.8 percent growth.
The Foreign Direct Investment (FDI) in July-April FY 2021 was recorded at $ 1,553.4 million compared to $ 2,301.3 million last year while total foreign portfolio investment registered an inflow of $ 2182.9 million during July-April FY 2021.
The remittances rose to $ 24.2 billion against $ 18.8 billion last year, with a growth of 29.0 percent. Remittances were recorded $2.8 billion in April 2021, against $ 1.8 billion in Apr 2020, showing an increase of 55.6 percent on a YoY basis. Workers’ remittances remained above $ 2.0 billion for eleven consecutive months.
Pakistan’s total liquid foreign exchange reserves increased to $22.9 billion on May 07, 2021. After July 5, 2017, the State Bank of Pakistan’s reserves now stood at $15.8 billion while commercial banks’ reserves remained $ 7.1 billion.