The GDP provisionally grew by a meager 0.92 percent in the 1QFY25. The figures have a flavor of Dar’s recipe where the sectors falling in the informal economy are growing higher than those where there is more formality and have published numbers. If the Pakistan economy grows at 3 percent (an optimistic target) in FY25, its three-year rolling average growth would be at 1.8 percent – the lowest since FY52.
This sums up the stability mantra where the inflation and interest rates are falling due to suppression in the demand while the growth and employment opportunities are simply missing.
The worst performance is in the important crops and the report from rural communities is bad where the deterioration in the farm income has a widespread impact on the economic demand from the rural sector and that is adversely impacting the manufacturing and services sector.
The important crop growth contracted by 11.2 percent; however, agriculture still posted a growth of 1.15 percent. The compensation comes from 4.9 percent growth in livestock and 2.1 percent growth in other crops. The data of important crops is visible, and the decline was expected –cotton production is down by 29.6 percent while sugarcane is down by 2.2 percent. The story of maize and rice is not encouraging either while the wheat outlook is meager as well. One may wonder what magic is in other crops, which are showing growth.
One of the top performers in the 1Q is livestock –it grew by 4.9 percent. This has more than 50 percent of agriculture weight and over 10 percent of overall GDP, and yet, there is no high-powered data collection. The sector mostly operates informally, and it is hard to assess the growth due to a lack of published data. And it’s counterintuitive to see higher growth in the livestock sector, and the overall economy is slowing down.
The industrial sector contraction continued, further dipping by 4.4 percent in the 1QFY25. Almost every sub-sector is negative apart from small-scale manufacturing (SSM) and slaughtering. Interestingly, like other growth areas, data visibility is low in these two. It’s ironic to find SSM growing at almost double digits (9.7%) when the LSM growth is still in red. The smaller industries usually feed to larger ones in the value chain. Their continued growth when the LSM is in negative defies logic.
The electricity, gas, and water supply sector’s sharp decline is finally arrested, as it has almost shrank by one-third last year, it’s up by a mere 0.6 percent in 1QFY25. These statistics self-depict the health of the energy sector.
The services sector, which relies on activities in the other two segments, is up by 1.4 percent in the 1QFY25. Notable growth is in Human health and social work (5.6%) food and accommodation (4.6%), information and communication (5.2%), and real estate activities (4.2%). The pickup in food and accommodation and ICT is intuitive, which is visible from jampacked hotels and restaurants, and constantly growing ICT exports. However, growth in real estate activities doesn’t make sense when the construction is sharply down.
In a nutshell, the overall economic activities are low, and the challenge remains to turn stability into growth.
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