Pakistan''s decline in competitiveness has been driven by the poor trade facilitation, infrastructure gaps, inefficient logistics and a poor investment climate, said Enrique Blanco Armas, World Bank''s Lead Country Economist for Pakistan. "The continued falling of exports highlights Pakistan''s worrying decline in export competitiveness," said Armas while briefing mediapersons on the WB report "Pakistan Development Update," here Monday.
Armas flanked by Muhammad Waheed, Senior Economist at WB, stated that Pakistan revenue collection as percentage to GDP is one of the lowest in the world. However, they hoped that inflation will remain in the single digit, growth would accelerate while there are little or no chances in remittances fall. The WB officials stated that falling exports and stagnant investment rates are still challenges to the economy. After achieving macroeconomic stability, the government''s structural reforms programme is progressing but there is much more to do, they added.
Armas termed China-Pakistan Economic Corridor (CPEC) very important for the country with respect to investment, infrastructure development, economic growth and job opportunities. Pakistan has also lagged behind its competitors in trade openness, reducing its prospects of regaining export momentum. The simple average tariff has fallen only slightly from 14.4 percent in fiscal year 2013 to 13.4 percent in fiscal year 2016.
According to the WB report, the fiscal year 2016 saw continuation of a longstanding decline in Pakistan''s share in global trade. This trend is a combined reflection of the Pakistan''s weakening export competitiveness and soft global demand in key sectors. Food and textiles, in particular, are key contributors to Pakistan''s exports and continue to suffer from a decline in international prices and demand. For example, although Pakistan exported more rice in fiscal year 2016 than the preceding year, lower international prices translated to a lower total value of rice exports.
The agriculture sector is predicted to recover from its poor performance in fiscal year 2016. Subdued growth in exports and accelerated growth in imports are expected to lead to a widening of the current account deficit from 1.1 percent in fiscal year 2016 to 1.7 percent in fiscal year 2017. Like previous years, this will be offset by remittance inflows so foreign exchange reserves are expected to continue to accumulate.
Exports continued to shrink during the fiscal year 2016, recording a decline of 8.8 percent compared to 3.9 percent fall in the fiscal year 2015. The imports in the fiscal year 2016 also contracted by 2.3 percent, primarily due to lower international oil and commodity prices. This resulted in a slight widening of the trade deficit, as a percentage of GDP from 6.3 percent in fiscal year 2015 to 6.5 percent in fiscal year 2016.
Pakistan''s export performance has also been poor over the past few years, caused by both a weak external environment and significant supply-side constraints, which affects the country''s competitiveness. The tension between revenue objectives and trade competitiveness may warrant.
The European Union (EU) is a major and growing market for Pakistan''s exports, accounting for 30.8 percent, of which the UK''s share is 7.4 percent in fiscal year 2016. An economic slowdown in the EU and the UK as a result of ''Brexit'' would likely slow the demand for Pakistani exports, particularly textile exports. Also, a potential appreciation of Pakistani rupee against British Pound and Euro would increase the price of Pakistan''s exports, thereby reducing their competitiveness.
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