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Highlights of Economic Survey of Pakistan 2006-07

ISLAMABAD (June 09 2007): Pakistan's economy continues to gain traction as it experiences the longest spell of its strongest growth in years. The outcomes of the outgoing fiscal year indicate that Pakistan's upbeat economic momentum remains on track.

Economic growth accelerated to 7.0 percent in 2006-07 on the back of robust growth in agriculture, manufacturing and services. Economic growth has been notably stable and resilient.

With economic growth at 7.0 percent in 2006-07, Pakistan's real GDP grew at an average rate of 7.0 percent per annum during the past five years (2003-07), and over 7.5 percent in four years running (2004-07).

Compared with other emerging economies in Asia, this put Pakistan as one of the fastest growing economies in the region, along with China, India and Vietnam The good performance resulted from a combination of generally sound economic policies and on-going structural reforms.

Based on the performance of half a decade of strong, stable, resilient and broad-based economic growth, it appeared that Pakistan's economy would continue to be a high-mean, low-variance economy over the medium term.

This year's economic growth was mainly driven by strong domestic demand, with investment taking lead over consumption for the first time in last three years. This year's economic growth benefited from higher consumption and investment demand owing to a growing middle class and favourable demographics. Increased contribution of investment to growth was a healthy development as it engendered employment growth, which supported consumption demand and together they played an important role in sustaining strong growth momentum in the medium term.

ACHIEVEMENTS IN FISCAL YEAR 2006-07: A strong economic growth of 7.0 percent. The economy grew at an average rate of 7.5 percent per annum during last four years (2004-07). It grew at an average rate 7 percent per annum during the last 5 years (2003-07).

The real per capita GDP grew by 5.2 percent and maintained an average growth of 5.5 percent per annum over last four years;

Per capita income in current dollar-term was up by 11.0 percent, to $925 from $833 of last year. A strong recovery in overall agricultural growth at 5.0 percent and major crops at 7.6 percent.

Highest production of wheat (23.52 million tons) in the country's history. An impressive 22.6 percent increase in sugarcane production (54.7 million tons–second highest production level in the history.

Large-scale manufacturing continued to grow robustly at 8.8 percent, albeit at a somewhat less torrid pace than last year. The overall services sector continued to maintain solid pace of expansion at 8.0 percent.

A sharp pickup in overall investment, reaching a new height of 23 percent of GDP and, most notably, private investment remained buoyant owing to the persistence of strong consumer demand. Despite monetary policy tightening the credit to private sector continued to grow strongly (12.2 percent) on the back of improving investment climate.

On the fiscal side, the overall budget deficit target (4.2 percent of GDP) and revenue collection target of the Central Board of Revenue (CBR) were achieved. Across all measures of vulnerability to external shocks, Pakistan's debt profile improved significantly over the past year.

Public debt declined from 56.9 percent to 53.4 percent of GDP and external debt and liabilities declined from 29.4 percent to 27.1 percent. Workers' remittances totalled $4.5 billion in the first ten months (July-April) of the fiscal year as against $3.6 billion in the same period of last year, depicting an increase of 22 6 percent If this trends is maintained, workers' remittances are likely to touch $5.5 billion for the year–the highest so far in the country's history:

Highest foreign investment flows at around $6 billion in ten months (July-April), and the year is expected to end with $6.5 billion. Exchange rate continued to remain stable despite widening of trade and current account deficits, clearly indicating strong inflows of external resources.

The successful launch of a new $75.0 million 10-year sovereign bond in international debt capital market with seven times over-subscription has been the defining moment in Pakistan's history as it reflected a strong vote of confidence by global investors on Pakistan's current economic prospects and future economic outlook.

SECTOR WISE PERFORMANCE GROWTH AND INVESTMENT: Real GDP growth accelerated to 7.0 percent in 2006-07 as against the revised estimates of 6.6 percent of last year and the 7.0 percent target for the year. The final estimate for 2004-05 had also been revised upward to 9.0 percent as against the revised estimate of 8.6 percent for the year. Thus, over the last four years the real GDP grew at an average rate of 7.5 percent per annum.

AGRICULTURE: Agriculture is still the single largest sector of the national economy It made a modest recovery this year. Overall agriculture grew by 5.0 percent in 2006-07 from 1.6 percent of last year. Within agriculture, the major crops witnessed strong recovery by growing at 7.6 percent against a negative growth of 4.1 percent of last year.

Wheat production was up by 10.5 percent to 23.5 million tons–highest wheat production recorded in the country's history. Sugarcane production, likewise, improved by 22.6 percent to 54.8 million tons–second highest size of the crop in the country's history.

Cotton production at 13.0 million bales remained at last year's level. Gram pulse, the other major crop, exhibited an impressive growth of 75.4 percent in 2006-07 to 0.842 million tons compared with 0.480 million tons of last year.

Livestock, with almost 50 percent contribution to agriculture, performed reasonably well at 4.3 percent this year as against a strong growth of 7.5 percent of last year.

MANUFACTURING: Manufacturing is the second largest sector of the economy, accounting for 19.1 percent of GDP. Overall manufacturing grew by 8.4 percent this year against 10 percent of last year. Large-scale manufacturing (LSM), accounting for nearly 70 percent of overall manufacturing, grew by 8.8 percent against the target of 12.5 percent and last year's achievement of 10.7 percent.

CONSTRUCTION: Construction continued its strong showing, partly helped by activity in private housing market, spending on physical infrastructure, and reconstruction activities in earthquake affected areas. The construction sector is estimated to have grown by 17.2 percent in 2006-07 as against 5.7 percent of last year.

SERVICES SECTOR: The services sector continued to perform strongly for third year in a row and grew by 8.0 percent in 2006-07 as against 9.6 percent of last year. Services sector grew at an average rate of 8.7 percent per annum during the last three years.

PER CAPITA INCOME: Per capita income is regarded as one of the key indicators of economic wellbeing of any country. Per capita income, defined as GNP at market price in dollar terms divided by the country's population, grew by 11 percent this year to US $925, up from US $833 of last year. The per capita income in dollar terms grew at an average rate of 13 percent per annum during last four years, rising from $586 in 2002-03 to $925 in 2006-07.

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