Naveed Ahmed

Pakistan's economy experienced growth in almost all sectors following a Covid-induced contraction. The expansionary policy framework fostered an economic growth of 6.0% in FY22, up from 5.7% in FY21, reports WealthPK. According to the State Bank of Pakistan's annual report, the economic sectors performed well in the past fiscal year as a result of supportive policies of the central bank.

The expansionary policies contributed to the growth in three basic sectors – agriculture, manufacturing and services. The agriculture sector saw increased crop yields countrywide except for wheat. The manufacturing sector also contributed positively to the economy. In addition, the services sector makes more than half of the overall growth.

The report highlights that the expansionary government policies played a significant role in fuelling economic growth, particularly during the first half of FY22. As a result of several policy reforms, the economy was relatively unaffected by the other two waves of the Covid epidemic in FY22. However, the SBP made tight monetary policies for structural adjustment to the policy environment to counteract the current account deficit in the last quarter.

According to the document, the widespread effect of expansionist policies at the beginning of FY22 outweighs the slowdown of industrial output at the end of the fiscal year, which helps to sustain the overall economic growth. The report mentions that in FY22, agricultural production climbed by 4.4% compared to 3.5% in the previous year. Crops and livestock subsectors contributed to the development of the agricultural industry.

However, the effect of the decline in wheat production on economic growth is offset by gains in rice, maize, sugarcane, and cotton production. Moreover, the cattle sector has maintained its robust performance and is accountable for fifty percent of the rise in agricultural value addition.

The report analyses that as far as the industrial sector is concerned, it has contributed the same amount to GDP as it did last year. Further, large-scale manufacturing (LSM) remained hopeful throughout the year, with strong growth contributions from the apparel, food, and automobile sectors.

The report describes that the manufacturing sector benefited from increased investment in FY22, tax relief for numerous sectors, export-oriented policies, vehicle manufacturing, constructional activities, and a loose monetary policy, including the SBP's concessionary lending programs.

The document adds that the number of individuals employed in the manufacturing sector in Sindh and Punjab remained stable. This sector was actively hiring at the beginning of the year, but this tendency diminished as the year progressed. However, there was still wage growth but it was slower than the inflation rate.

Further, it adds that the rise of the gross domestic product was driven mostly by the consumer spending, while investments contributed just a little. There is a cause for concern since increased consumption without equivalent investment will cause net exports to be utilized to finance domestic expenditure. The report also indicates that the total investment at the market price in FY22 was 24.1% as compared to 16 % in FY21. Credit expansion via SBP's concessionary financing schemes also substantially contributed to this.

The investment-to-GDP ratio was still lower in the economy. Owing to a lack of investment and growing dependency on consumption for development, the country's economy was left vulnerable to external sector shocks. To provide the foundation for Pakistan's economy to grow consistently and sustainably, structural improvements that enhance domestic savings and invest those funds in productive businesses are required.

Credit: Independent News Pakistan-WealthPk