Economic growth: Pakistan — a frontrunner

The global economic revival appears to be staging a comeback from the pandemic crisis faster than expected. Faster-than-expected vaccination rates and return to near normalcy have led to upgrades in economies while lack of access to vaccines and renewed waves of Covid-19 cases in some countries, notably India, have led to downgrades, the International Monetary Fund (IMF) said.

The IMF acknowledged stronger economic activity and revised its global growth forecast at six per cent for the current year and 4.9pc for the next year, with region-wise forecasts as follows:

==========================================
                          2020        2021
                           (%)         (%)
==========================================
World                     -3.2         6.0
Advanced
Economies                 -4.6         5.6
Euro Zone                 -6.5         4.6
Emerging &
developing Asia           -0.9         7.5
Emerging &
developing Europe         -2.0         4.9
Latin America             -7.0         5.8
M.E & Central
Asia                      -2.6         4.0
Sub Saharan
Africa                    -1.8         3.4
==========================================

Advanced Economies, Euro Zone and Latin America’s economies suffered the most in 2020 but have staged an impressive comeback in 2021. Emerging and developing Asia suffered the least and their economic outlook for 2021 is in the lead.

The IMF revision downgraded India’s 2021 growth forecast by three percentage points because of widespread incidence of Delta variant and resultant subdued economic activities.

The IMF considers Pakistan’s growth as impressive and has revised upward the GDP growth projection to 3.9 percent for 2021 from its earlier projection of 1.5 percent. Pakistan’s Finance Minister anticipates a 5 percent growth in FY2022 and more than 6 percent in FY2023.

While the global economic recovery continues unmoved by the 4th Covid-19 wave, a widening gap between advanced economies and many emerging market and developing economies is also surfacing.

The biggest challenge to businesses and industry in 2020 has been the disruptions in supply chains of finished goods and raw materials. In 2021, supply is returning towards normalcy. According to an IMF forecast, the global trade volumes would expand by 9.7 percent in 2021, moderating to 7 percent in 2022. Services businesses, notably, aviation industry, hotel industry and tourism are expected to recover more slowly, consistent with subdued cross-border travels until virus transmission declines to low levels everywhere.

Pakistan capitalized well on the global supply chain disruptions, notably, the finished textile goods because the leading competitors in the field – India and Bangladesh – could not meet the demand due to an acute Covid situation. Pakistan successfully cashed in on this opportunity. Its exports recorded an impressive growth, driven by the textiles, with over 30 percent growth. This growth in exports is however not sustainable and may hold good till such time the competitors, notably, India and Bangladesh do not stage a comeback in the global market.

Pakistan’s textile industry should capitalize on this opportunity by reinvesting a good part of their windfall profits into upgrading their plants and technology to regain their once commanding position in the global market. The choice made in previous years by the textile industry of investing their gains in multiple venues of quick returns such as real estate was not a good choice. Arguably, their flawed approach to investment moved Pakistan out of its global leading position in textile exports. The government should also recognise the challenges ahead and must take measures at this stage to maintain country’s growth in exports. Overall, Pakistan has managed well on all fronts during the Covid-19 crisis. Apart from being rated as a frontrunner in economic growth in the region and beyond, it managed to uplift its social sector through multiple programs and cope with the pandemic challenge with one of the lowest global infection and death rates. It also performed well in its countrywide vaccination programme and is one of the few countries where door-to-door vaccination is being commenced for its citizens.

(The writer is former President, Overseas Investors Chambers of Commerce and Industry)

Copyright Business Recorder, 2021