Uzair Bin Farid

Pakistan has always remained in the domain of “expansion” as opposed to the domain of “economic growth” according to Dr Aneel Salman of the Islamabad Policy Research Institute (IPRI).

Dr Aneel, who heads the Economic Security Department at IPRI, was speaking at the IPRI Contemporary Economics Autumn School 2022 event on Tuesday. He gave a lecture titled “Reinterpreting Economic Growth of Pakistan: Parables and Realities.”

Dr Aneel referred to the definition of expansion as used by the Asian Development Bank (ADB). According to the ADB definition of expansion, it is the phenomenon when an economy recovers the lost ground in a period of economic recession. He said that Pakistan has not been lucky to enter into the domain of economic growth per se. The reason for this has been the recurrent boom and bust periods of the business cycle.

He said that Pakistan suffered from structural inefficiencies in the form of short-term policy cycles which made for the emergence of recurrent phases of high growth followed by an economic crash.

For example, he said, during the Covid year our growth rate went into negative territory. And immediately after that year, he said, we saw a high growth rate of upwards of 5%. This high growth rate although promising does not promise a long-term success. Since the nominal growth measured on the back of growth of the previous year gives a high number when the previous number is already small.

This is like making up for lost ground. We lost so much ground in the previous year that when we recovered it in the next year it seemed like a huge success. This, however, is a misreading of the actual situation. Since we had lost all of our growth momentum the previous year, so in the next year we simply caught up with what we had lost.

Saying that our “growth” has increased does not do justice to the actual situation on the ground. If an unbiased analysis is carried out it shows that Pakistan’s economy has remained in a situation where it loses momentum and then regains that momentum only to lose it again.

“These have been the characteristic phases of Pakistan’s economy. We move between the cycles of ‘expansion’ and ‘recession.’ It is not the cycles of ‘growth’ and ‘recession,’” he said.

He also pointed out the backward and inward-looking approach to the economy. He said that “celebrating growth numbers on the back of an expanding real estate sector which predominantly works on speculation in Pakistan is a backward-looking approach. We need to be outward-looking.”

As for comparison with neighbours, he said that Pakistan’s GDP is predominantly dependent on consumption. “Our consumption contributes 96% to the gross domestic product whereas for India and Bangladesh this number stands at around 50%. This means that private and public investments together with net exports contribute almost 50% to these latter economies whereas in Pakistan their share is a meagre 4% which is not a very optimistic scenario,” he said.

Credit: Independent News Pakistan-WealthPk