Growth below target

PAKISTAN’S latest GDP figures offer a picture of modest recovery. A projected growth rate of 3.7pc for the current fiscal falls short of the government’s original 4pc target. This is slightly less than even the lower bound of the State Bank’s projected range of 3.75-4.75pc. But it is still an improvement over the previous year’s 3.18pc expansion. Thankfully, the SBP anticipates growth, albeit tepid, during much of next year in case energy prices stay elevated and the Gulf crisis lingers. That said, the numbers show that the economy continues its struggle to break out of the low-growth trap. Structural issues are constraining long-term, faster growth prospects without overheating the economy. In this context, even modest growth is welcome after four years of economic instability, external financing crises and inflationary shocks, and despite oil price hikes triggered by the Gulf conflict. The economy’s size has increased to over $452bn while per capita income has edged up to $1,901. Large-scale manufacturing has rebounded while services remain the dominant contributor to growth. Agriculture, which employs much of the workforce and supports rural incomes, on the other hand, has underperformed. A growth of 2.89pc is hardly robust for a sector seen as the economy’s backbone. The composition of growth is also of concern. Much of the industrial rebound has come from a low base after years of contraction. Automobile production rising by over 61pc sounds impressive, but it reflects recovery from previously depressed levels caused by import curbs and supply disruptions. Services-led growth, meanwhile, reflects the continued expansion of consumption and state expenditure rather than a shift towards productivity-driven development. Pakistan lacks the export-oriented industrial expansion that has driven sustained high growth in other economies. The disconnect between growth and living standards is another concern. Per capita income has increased in dollar terms. But much of the