Pakistan’s economy contracted 0.38%

ISLAMABAD: Advisor to Prime Minister Imran Khan on Finance, Abdul Hafeez Shaikh unveiled the pre-budget document, Economic Survey 2019-20 to share the key economic indicators and the performance of different sectors of the economy.

While unveiling the Economic Survey 2019-20  in a press conference on Thursday, Hafeez Sheikh said that Pakistan Tehreek-e-Insaf (PTI) government took loans to tackle the burden of the debt left by previous governments.

“Pakistan returned Rs5,000 billion in debt- the loans of past years,” he said.

GDP Growth Rate

Abdul Hafeez Shaikh said that the provisional GDP growth rate for FY2020 is estimated at negative 0.38%. He said that GDP will fall by Rs3 billion in the next fiscal year due to Covid-19 impact.

The advisor said that Covid-19 has pushed the global economies towards a recession, adding that Pakistan has also been affected by economic shocks caused by the outbreak of coronavirus.

He said that the government announced two types of relief packages for the poor to deal with the Covid-19 pandemic. “Prime Minister Imran Khan announced Rs1.3 trillion relief package for poor and also announced a support package for small businesses and construction industry”.

Talking about the government’s measures related to the current account deficit, saying that steps had been taken to reduce the deficit by 30% to $13.4 bn in FY 19.

Sheikh said that the government aimed to provide further relief to the masses by not imposing new taxes.

FBR tax collection

Speaking about the tax collection, Finance advisor said that FBR tax collection could have reached Rs4,700 billion but right now it’s at Rs3,900 billion. “The FBR lost Rs700 billion to Rs750 billion in tax collection,” added Hafeez Sheikh.

Hafeez Sheikh said that provisional GDP growth rate for FY-2020 is estimated at negative 0.38 percent, however, macroeconomic stabilization measures undertaken by the government over the past year resulted in significant reduction in Saving-Investment Gap which was mainly driven by reduction in the trade deficit and increase in workers’ remittances.

Industrial Sector 

According to an economic survey report, similar to the industrial sector, the services sector of the economy has also witnessed significant impact of the lockdown situation in the country due to COVID-19.

“The services sector has declined provisionally at 0.59 percent mainly due to 3.42 percent decline in Wholesale and Retail Trade sector and 7.13 percent decline in Transport, Storage and Communication sectors,” reads the Pakistan Economic Survey 2019-2020.

The agriculture sector recorded strong growth of 2.67 percent, considerably higher than 0.58 percent growth achieved in last year

Fiscal Development

The fiscal outcomes remained strong during the first nine months of current fiscal year after
sharp deterioration in FY2019.

“The fiscal deficit has substantially reduced to 4.0 percent of GDP during July-March,
FY2020 against 5.1 percent of GDP in the comparable period last year,” it added.

Inflation

The report notes that the inflation rate started easing out due to government policies after January and for the period July-April FY2020 recorded at 11.2 percent against 6.5 percent during the same period last year.

“The other inflationary indicators like Sensitive Price Indicator (SPI) recorded at 14.3 percent against 4.2 percent over the same period last year. Wholesale Price Index (WPI) recorded at 12.2 percent during Jul-April FY2020 compared to 16.2 percent same period last year,” according to Economic Survey Report 2019-20.