Economy grows 4.1 percent in 2009-10

Pakistan's economy likely grew by 4.1 percent in the fiscal year ending on June 30, above a target of 3.3 percent, and is expected to grow even faster in the next fiscal year. Nuclear-armed Pakistan, a critical US ally fighting to quell a growing Islamist militancy, has struggled to revive its sluggish economy which, government officials say, has now started to show signs of stability.
The government had earlier expected 3.3 percent economic growth in the 2009/10 (July-June) fiscal year, but officials said a rebound in the large-scale manufacturing sector and a strong performance in services sector contributed to the higher growth projection.
The Planning Commission, which prepares the growth targets, held a meeting on Friday to review economic performance and set targets for the next fiscal year. "During the current fiscal year the achieved GDP (gross domestic product) growth rate is 4.1 percent as against the target growth rate of 3.3 percent," the Planning Commission said in a statement late on Friday. "The GDP growth for the next year has been projected at 4.5 percent on assumptions that the agriculture sector will grow by 3.8 percent, manufacturing sector by 5.6 percent and the services sector by 4.7 percent," the commission said.
Large-scale manufacturing contributed a major share to the growth in the outgoing fiscal year, with a 4.4 percent increase, after having declined to 3.7 percent in the 2008/09 year, a Planning Commission official said. The services sector surpassed its 3.9 percent target and grew by 4.6 percent in the 2009/10 fiscal year, the official said adding that the next year's target has been set at 4.7 percent.
The agriculture sector's growth fell to 2 percent in 2009/10 against 4 percent last year, but it was showing signs of stability, the official said. Lower production of major crops, including that of sugar, was a major reason for the decline. The National Economic Council, a top economic-decision making body, will meet on May 28 to give final approval to the yearly targets.
The commission has recommended an inflation target of 8 percent for the next fiscal year, the official said. The central bank has forecast inflation for the whole of 2009/10 to average between 11.0 and 12.0 percent. The consumer price index (CPI), a key indicator of inflation, rose 13.26 percent in April from a year ago.
The central bank is widely expected to keep its key policy rate unchanged at 12.5 percent when it sets monetary policy for the next two months on Monday, as inflation still poses a threat, it has said. The IMF, which bailed out Pakistan in 2008 to avert a balance of payments crisis, has repeatedly urged caution in cutting rates, listing persistent inflation as one of the worries for Pakistan's economy.