Since 2013, Pakistan’s economic growth has been showing positive trends. During the last financial year, the country’s GDP expanded by 5.3 percent – recording the highest growth in the last one decade.
This growth too was recorded among a slowing rate of industrial growth and a not-so-satisfactory performance of large-scale manufacturing. The question which is being closely studied by economists is as follows: what is the driving force of growth in the last four years?
Under the Economic Survey of Pakistan 2016-17, the government has opined that the primary source of growth has been domestic consumption. The survey revealed that spending of farmers and urban middle class have increased the overall domestic consumption which is a positive sign for the economy. Private investment, too, played a supporting role in increasing growth.
Last fiscal year, domestic consumption moved up from 6.2 points and reached 7.9 percentage points to GDP. On the other hand, net investment contribution jumped at 1.3 percentage points from 1.0 point the previous year.
Also, mainly the investment was dominated by the public sector. The global dip in the oil price drove the government to increase its development expenditure. The expenditure was mainly done on CPEC-related large infrastructure projects.
Since the commencement of the work on the CPEC project, the share of public sector expenditure in gross capital formation has marked a significant growth. This also calls for an analysis of yet another important economic factor — the private sector.
According to Ali Jumani, a research analyst at Alfalah Securities, “Private investment is driving domestic consumption. Domestic businesses are currently investing in sectors like auto, steel, motorcycles, food and cement to meet the strong demand.”
Analysts have opined that the existing market players are increasing the production capacities because of the increased spending of middle-class income. The CPEC project too has increased the demand for various domestic items as well.
Domestic production is essential for the country’s economic growth. A country cannot rely on borrowing for long. For sustainable economic growth, the country should work more efficiently to increase its exports.