Multiple barriers drag growth rate down to 0.29% in FY2023

Multiple barriers drag growth rate down to 0.29% in FY2023

ISLAMABAD, Jun 8 (APP):The severe macroeconomic imbalances, flood damages, domestic supply shocks, and international economic slowdown dampened the economic growth to just 0.29 percent in FY2023, said the Pakistan Economic Survey 2022-23 launched on Thursday.

According to the pre-budget document, following the budget announcement in June 2022, positive economic expectations and the performance of key indicators resulted in the government projecting GDP (gross domestic product) growth of approximately 5.0 percent in FY2023.

However, the economy lost momentum in the first quarter of the ongoing fiscal year due to the severe downturn in the global economy and flash floods of July-August 2022 and as a result it suffered from significant domestic supply disruptions.

“The flood damage is estimated at Rs 3.2 trillion (US$14.9 billion), the loss to GDP at Rs 3.3 trillion (US$15.2 billion), and recorded need for rehabilitation of damages at Rs 3.5 trillion (US$16.3 billion),” the Survey reported.

On the international front, the prolonged Russia-Ukraine conflict adversely affected global growth and inflation remained unexpectedly high.

In FY2023, Pakistan’s GDP grew by 0.29 percent, with 1.55 percent growth in agriculture, negative growth of -2.94 percent in industrial sector, and 0.86 percent in services sector.

The GDP at current market prices recorded Rs 84,658 billion, showing a 27.10 percent growth over the previous year Rs 66,624 billion (US$ 341 billion).

The per capita income decreased from US$ 1765 to US$ 1568 in FY2023. This deceleration was attributed to the significant depreciation of PKR and the contraction in economic activity.

For FY2023, the Investment-to-GDP ratio stood at 13.6 percent as compared to 15.6 percent in FY2022. The estimates of Gross Fixed Capital Formation (GFCF) stood at Rs 10,093.5 billion showing an increase of 8.1 percent compared to FY2022.

The industry-wise disaggregation of GFCF by the general government suggested an increase of 17.7 percent, 89.2 percent, and 5.9 percent in public administration & social security, education, and human health & social work, respectively.

According to the Survey, balancing macroeconomic factors for long-term, sustainable, and inclusive growth “requires attention to both supply and demand management and sectoral reforms in the economy”.

“To keep supply-side strategies in focus, the government aims to expand production capacity, improving public and private investments domestically, attracting FDI, and participation in global value chains,” it said.

“This strategy also focuses on the investment friendly environment where potential investors feel confident making long-term decisions. Once production capacity increases, there will be a rise in the production of goods for export and import substitution, which can enhance trade performance.”

The Survey said the government also understood that the focus should remain on infrastructure investment rather than consumption, and engaging youth in entrepreneurship, which was indispensable to achieve sustainable growth raising the per capita income.

“As such, the economy will be able to enhance the domestic production that will replace imports and offer more supply to foreign markets. These improvements are vital to boost the country’s potential output and employment rates, and the government is very much committed to ensuring stability and confidence in the economy,” it added.

APP Services