The myth about economic turnaround
WHERE in the world, people continue to suffer economically while the government claims economic situation to be more than satisfactory? Where in the world about 2 crore people go below the poverty line in less than 3 years while the government celebrates economic turnaround? Where in the world 50 lac people lose their jobs within 3 years but the government ministers including the PM share congratulatory tweets about fantastic economic growth? Where in the world there is double digit inflation and price hikes become uncontrollable while the government satisfies itself by releasing dubious economic numbers?
This is of course Pakistan and anything is possible. The government having miserably failed to provide any relief to the common man will do anything to showcase its performance – but only on the papers and tweets & other media.
In reality, people continue to suffer through price increases, unemployment and increasing poverty levels. In addition, the real wages have been negative in the last 2 years.
Compared to annual average increase of 4% during 2013-2018, real wages have been negative in the range of 6-12% in the last 2-3 years – depending on the category of workers.
Real wages represent increases in wages after adjusting for inflation. Just this one indicator shows masses are worse off in the last 3 years compared to the period 2013-2018.
Ask any Pakistani belonging to any group if he or she is better off today than they were in mid 2018. We all know the answer.
Interestingly even the government ministers know that people are generally worse off today compared to the period 2017-2018.
But let’s first look at the numbers released by the government in recent days.
The government claims include:
1. GDP size has grown up to USD 296 billion.
2. Accordingly per capita GDP has gone up from dollars 1361 to dollars 1543
3. Most important, the government is claiming, GDP growth for this fiscal year will be 3.94 %.
Let’s take the last one first. Almost all independent economists and financial experts were taken by surprise at this number. The projections were far lower and for good reason.
World Bank and IMF were projecting 1.3-1.5% growth while the government itself was forecasting growth of 2.1%. Suddenly then what happened? The government comes up with a number which is almost double that of its own estimate.
To begin with, the credibility of the present government in terms of numbers, figures etc is extremely poor.
Recall the GDP growth number released in July 2019 at the end of its first fiscal year. The government claimed GDP growth of 3.3% in its first fiscal year.
Bad enough considering it was coming down from 5.8% in fiscal 2018 – the last year of PML-N tenure but what followed was even worse.
After several months, the government changed the number from 3.3% to 1.9% – a significant adjustment never seen in recent history.
There has never been explanation as to why such a drastic adjustment was necessary and why the calculations in the first place were so wrong.
Between July 2019 and Feb 2020 when the figure was corrected from 3.3% to 1.9%, all our planning and other economic decision making was based on a growth rate of 3.3%.
Even investors, both domestic & foreign, would have considered economy growing at 3.3% in taking their investment decisions.
This is just one example of how numbers are prematurely announced without waiting for key information.
But let’s agree for a moment that the estimate of 3.94% is genuine. Is this worth enough to celebrate? And that too after 3 years in office. More so considering GDP growth crossed 4% after the first year under PML-N.
Thereafter we saw a consistent increase in each of the remaining 4 years ending with GDP growth of 5.8% – the highest in many years.
Let’s now look at the government claims about significant increase in per capita GDP. Even if we agree to the government numbers, per capita GDP stands at dollars 1543. Now compare this with dollars 1652 when the PML-N government left in June 2018.
So we are worse off today in terms of per capita GDP compared to last year of PML-N government.
But more worrying is the wrong numbers used by the present government to come out with per capita GDP number of 1543.
In spite of the known population figure which has also been approved by council of common interest, the old population figure was used to inflate the number and to showcase a better performance.
If we take the new population figure, the per capita GDP falls even below dollar 1200 – a significant reduction from 1652 in June 2018.
And finally about the GDP size. The government claims it has significantly increased from 264 billion dollars to 296 billion.
A better way to look at this would be to compare where it stood in June 2018. When we left the government, the GDP size was 315 billion dollars.
If the same upward trend witnessed in the period 2013-2018 had continued, our GDP size would have been around dollars 360 and that’s on a conservative basis. Compare that 360 to 296 billion where it stands today – quite a significant fall.
Important here to mention what’s happening on the export side. The government has been giving a spin to showcase a major improvement in exports. The reality is quite different.
As it looks, the export number at the end of this fiscal year, will be lower or around the same level as it was in June 2018.
Imagine 3 years wasted. Even with massive devaluation, exports have remained stagnant in last 3 years.
And finally about the stock exchange which is being projected as another sign of economic turnaround. The index is presently at 47000.
This means in 3 years, it has grown just about 9% – an average of 3% per annum. This is probably the worst 3 year period in recent stock market history.
In the first 3 years between 2013-2016, stock market index grew 100 % and even went up to 53000 by May 2017 – an unbelievable increase of 178%. That is some performance – a performance worth celebrating.
— The writer is former governor of Sindh and presently PML-N spokesman.