ISLAMABAD: The GDP growth stood at one percent in the second quarter of the ongoing fiscal year against the revised 2.50 percent in the first quarter despite improvement in the agriculture sector.

This has been acknowledged by the Economic Adviser Wing (EAW) of the Finance Ministry in its monthly economic update and outlook for March 2024 released on Thursday.

The decline in LSM of negative -0.52 percent may have been the reason for a decrease in the GDP growth.

Q2FY24: Pakistan sees GDP growth of 1%, below expectation

The decline in LSM may have been due to a massive slash in the credit to the private sector. The credit to the private sector during July-January 2024 plummeted 41.1 percent to Rs180.7 billion from Rs393.6 billion for the same period a year before.

Additionally, a continuous decline in remittance indicates that the government may not been able to stem the decline.

Remittance declined by 1.2 percent during July-February 2024 to $18.1 billion from $18.3 billion in the same period a year before. Foreign direct investment (FDI) witnessed month-on-month an increase of 15.7 percent of $ 131.2 million in February 2024 as against an outflow of $ 173 million in the last month.

Exports also witnessed an increase of 10.2 percent, however, it remains unclear whether the increase was due to price or quantity increase.

The Finance Ministry also forewarned that sustainable economic recovery is contingent to the continuation of fiscal consolidation and prudent policy stance, timely and adequate financial inflows to meet gross financing needs and external sector stability.

The agriculture outlook, according to the EAW of the Finance Ministry, is promising as in Rabi season 2023-24, the wheat sowing has surpassed the target of 8.998 million hectares. The farm inputs also showcased impressive growth in the fiscal year 2024 with tractor production and sales up by 68.6 percent and 67.6 percent, respectively and agriculture credit disbursement also rose by 34.7 percent to Rs1,279.4 billion. However, urea offtake decreased by 4.2 percent, while DAP offtake increased by 15 percent compared to the previous year.

However, LSM, the performance of auto sector remained subdued due to massive increases in inputs prices, and tightening auto finance during July-February 2024 in the car production and sale decreased by 40.8 percent and 40.9 percent, while trucks and buses production and sale decreased by 50.6 percent and 48.7 percent, respectively.

Tractor’s production and sale, however, increased by 68.6 percent and 67.6 percent. Cement dispatches (domestic and exports) during July-February 2024 were 30.555 million tons, 2.52 percent higher than 29.805 million tons during the corresponding period of the last fiscal year. Domestic dispatches during this period were 26.059 million tons against 27.207 million tons last year showing a reduction of 4.2 percent while export dispatches showed a healthy increase of 73.10 percent as the volumes increased to 4.496 million tons compared to 2.597 million ton exports of last fiscal year.

On the fiscal front, the primary surplus has been increased to Rs1,939 billion during July-January 2024 from Rs945 billion for the same period of last year.

Despite improvement in the primary surplus, the widening fiscal deficit indicates a persistent pressure on public finances. The fiscal deficit during July-January 2024, however, increased to 2.6 percent of GDP as compared to 2.3 percent recorded last year.

There was a decline of 13 percent in the sale of petroleum products during the first eight months of fiscal year 2024 and dropped to 10.2 million tons compared to 11.7 million tons during the same period last year.

Inflation to hover around 22.5-23.5 percent in March 2024 with expectations of a gradual easing further to 21-22 percent in April 2024.

However, independent economists such as former finance minister Dr Hafeez Pasha have very little faith in the Pakistan Bureau of Statistics (PBS)’ inflation data and believe that CPI- and SPI-based inflation rates computed by the PBS are understated.

Copyright Business Recorder, 2024