Exports are expected to grow by 11.6 percent in FY 2018-19 as a result of CPEC

The government expects growth in industrial sector in the next fiscal year due to better supply of energy and planned investment under China-Pakistan Economic Corridor (CPEC). According to working paper presented in the Annual Plan Coordination Committee (APCC) meeting, which is also available with Business Recorder, in view of steady growth rate during the current fiscal year, the industrial sector is expected to grow by 7.6 percent during 2018-19 on the back of better energy supply and planned investment under CPEC.

The government expects growth in industrial sector in the next fiscal year due to better supply of energy and planned investment under China Pakistan Economic Corridor (CPEC). According to working paper presented in the Annual Plan Coordination Committee (APCC) meeting, which is also available with Business Recorder, in view of steady growth rate during the current fiscal year, the industrial sector is expected to grow by 7.6 percent during 2018-19 on the back of better energy supply and planned investment under CPEC.

The mining & quarrying sector is projected to grow by 3.6 percent, manufacturing sector by 7.8 percent, LSM by 8.1 percent, construction by 10 percent and electricity generation & distribution and gas distribution by 7.5 percent. Moreover, the increase in consumer demand is expected to further spur private sector activities and help maintain aggregate demand.About balance of payments, the documents further revealed that resurgence of global commodity prices in 2018-19 is a positive signal for exporters. Concerted efforts are required to enhance quality of exportable, diversify product range and look for new markets. Trade deficit is projected to be at $29.2 billion. With CPEC investments and better performance in industrial sector, exports are expected to gain momentum. Exports for 2018-19 are thus projected to grow by 11.6 percent while imports are projected to increase by 6.3 percent. The current account is projected to be in deficit by $12.5 billion in 2018-19 (3.8 percent of GDP).

About monetary developments, the documents revealed that he policy rate stood at 40 years lowest at 5.75 percent for the first 6 months of 2017-18 and inched up to 6 percent in January 2018. Money supply (M2) grew by 5.3 percent (Rs 771 billion) during July-March 2017-18 as compared to 5.9 percent (Rs 756 billion) during the corresponding period of the last year. Borrowing from scheduled banks was retired to the tune of Rs1,378.5 billion in July-March 2017-18 as compared to retirement of Rs97.5 billion in July-March 2016-17.

According to documents, the government borrowing from the State Bank of Pakistan (SBP) stood at Rs2,236.7 billion in the same period compared to Rs801.6 billion last year. Notwithstanding inflationary expectations, this shift in borrowing from scheduled banks to SBP will create space for credit to private sector, which has already expanded by Rs469.2 billion during July-March 2017-18 compared to the expansion of Rs438.6 billion last year.

About balance of payment, the current account deficit for July-February 2017-18 stood at $10.8 billion compared to $7.2 billion in July-February 2016-17 indicating deterioration in current account deficit which stood at 4.8 percent of GDP compared to 3.6 percent last year. Trade deficit during the first eight months of 2017-18 stood at $19.7 billion with exports of $15.9 billion and imports of $35.6 billion. During July-February 2017-18, exports increased by 12.2 percent compared to a decline of 0.8 percent in July-February 2016-17 whereas imports increased by 17.3 per cent compared to an increase of 12.5 percent in comparable period of 2016-17.

The paper further described about workers” remittances which are amounted to $14.6 billion in July-March 2017-18 compared with US $14.1 billion during same period of the last year, registering an increase of 3.5 percent. The total liquid foreign exchange reserves stood at $17.8 billion on 30th March 2018.

Working paper of Annual Plan 2018-19 envisages overall macroeconomic stability in view of encouraging agriculture performance and steady industrial growth. The GDP growth for 2018-19 is targeted at 6.2 percent with contributions from agriculture (3.8 percent), industry (7.6 percent) and services (6.5 percent). The growth targets are subject to favorable weather conditions, managing current account deficit, consistent economic policies and aligned monetary and fiscal policies.

The documents further said that services sector is targeted to grow by 6.5 percent in 2018-19, supported by growth of 7.8 percent in wholesale & retail trade, 4.9 percent in transport, storage & communication, 7.5 percent in finance & insurance, 4 percent in housing, 7.2 percent in general government services and 6.8 percent in other private services. The expected higher growth in commodity producing sectors will support the targeted growth in services sector.

Regarding to fiscal policy, the policy during 2018-19 envisages containing fiscal deficit, mobilizing more revenues, controlling current spending and switching to targeted subsidies while prioritizing development spending.