Pakistan Development Update, October 2015
Pakistan’s economy posted GDP growth of 4.2 percent in FY2014/15 compared to 4.0 percent in the previous year, but below the 5.1 percent targeted growth envisaged for FY2014-15 in the annual plan. On the demand side, investment and government consu...
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| Format: | Report |
| Language: | English en_US |
| Published: |
Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/11/25251592/pakistan-development-update http://hdl.handle.net/10986/22926 |
| Summary: | Pakistan’s economy posted GDP growth of
4.2 percent in FY2014/15 compared to 4.0 percent in the
previous year, but below the 5.1 percent targeted growth
envisaged for FY2014-15 in the annual plan. On the demand
side, investment and government consumption posted strong
growth. Private consumption was supported by record high
remittances in the order of US$18.7 billion in FY2014/15.
The share of investment in GDP remains relatively small, at
15.1 percent of GDP, about half of the South Asian average
at 30 percent. More worryingly, private investment as a
share of GDP has been declining and stood at 9.7 percent of
GDP in FY2014/15. This low investment has implications for
Pakistan’s long term growth potential that has been on a
clear declining long run trend as discussed in special
section three in this issue. Exports declined in FY2014/15
and this decline was broad based, a result of both low
international prices of some of Pakistan’s export products
as well as weak external demand. Textiles, which account for
about half of all exports, posted a significant decline.
Imports also declined, mainly due to lower international oil
and commodity prices, although to a lesser extent than
exports. Non-oil imports increased significantly, in
particular metals, food, machinery and wood and paper
products. Fiscal consolidation will require strong tax
revenue efforts by the government as well as gradual
phasing-out of energy-related subsidies and of reduced
support to loss-making SOEs. Efforts to tighten fiscal
policy will also need closer coordination with the
provinces, and ensuring that progress in the country’s
decentralization effort better aligns the province’s
responsibilities with the increased resource envelop that
resulted from the 7th NFC award. Efforts to prevent major
shocks to the government’s fiscal stance should also include
reducing the fiscal risks of the frequent natural disasters
affecting Pakistan, an issue discussed in detail in special
section five. On the external side, it will be important to
increase efforts to attract more FDI from the current low
levels, by improving the overall business climate and
address regulatory weaknesses at the sectoral level that may
be affecting the country’s ability to attract investment.
Continued implementation of the government’s reform agenda
to address structural bottlenecks, in particular in the
energy sector, will also be crucial to be able to attract
more investment. |
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