Economy expected to remain strong in 2008: ESCAP Survey

ISLAMABAD—Pakistan’s economy is expected to remain strong in 2008, growing at 6.5 per cent, despite several challenges, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) reported.
The ESCAP launched its flagship publication “Economic and Social Survey of Asia and the Pacific 2008 in more than 20 capitals in the region, in New York and Geneva on Thursday. The Survey was launched in Pakistan at a press briefing held at the United Nations Information Centre here. Dr Sarfraz Khan Qureshi, Director Innovative Development Strategies presented and explained its salient features and shed light on the analysis of Pakistan’s performance.
The Survey, entitled “Sustaining Growth and Sharing Prosperity,” addresses most important current issues facing the region including Pakistan. It says that 218 million - a third of the region’s poor, largely living in rural areas - could be taken out of poverty by raising agricultural productivity if governments address decades of policy neglect and failure in the agricultural sector.
The Survey also calls for a comprehensive liberalization of global trade in agriculture, as this would take a further 48 million people out of poverty in the region. It said the growth would be close to the seven per cent expansion recorded in 2007 and the 6.6 per cent in 2006. The sustained growth also highlights the impact of economic reforms and policies over recent years.
“In just a few years, sound macroeconomic policies have transformed Pakistan’s consumption-led growth impetus to one in which investment-led growth can assume a more important role,” ESCAP said. In 2007, the agricultural sector recovered strongly, growing by five per cent from just 1.6 per cent in 2006, while the manufacturing sector’s growth continued at 8.4 per cent in 2007, marginally down from the 10 per cent recorded in 2006.
A major driver of growth was investment. Both domestic private sources and a record inflow of foreign direct investment, in which inflows doubled from 2006 to reach US$8.4 billion last year boosted the performance. “In 2007, investment in real terms increased by over 20 per cent,” ESCAP said. Pakistan’s inflation rate was 7.8 per cent in 2007, while in 2008 it is expected to remain high, close to last year’s levels, the Survey claimed.
“The inflation was fuelled by global increases in some commodity prices, higher utility tariffs, and by local supply- and demand-driven factors,” ESCAP observed. The government’s efforts to stem price rises included the expansion of the public-sector utility-store network, even extending the programme of subsidies for essential edibles to rural areas.
The ESCAP said the government’s expansionary fiscal policy was seeking to promote more investment growth and pro-poor spending. Development expenditure has been taking an increasing share of overall expenditure in recent years. The rates of growth for exports fell 3.4 per cent while for imports the growth rate dropped by 6.9 per cent, the Survey claimed. A widening trade deficit was partly covered by remittances from migrant workers, which in 2007 rose to a record amount of $5.5 billion.
Pakistan successfully reduced its external debt burden through rescheduling, a debt swap for social spending, debt cancellation and the prepayment of expensive debt. As a result the debt service ratio has declined substantially over the years 2000 to 2006 though some 30 per cent of government revenues remain allocated to debt servicing.—APP