ISLAMABAD: As a second thought, the PTI-led government has decided to revise downward all the macroeconomic targets through the upcoming mini budget, including slashing down the real GDP growth target while allowing upward revision in the budget deficit for the current financial year.
The government has decided to unveil a five year macroeconomic framework along with the mini budget before the parliament expected to be unveiled within this month, probably in the third or fourth week in which the fiscal consolidation will be envisaged in the first two years in 2018-19 and 2019-20. This will impact the GDP growth rate negatively.
“So the economic slowdown is on the horizon through this difficult period of fiscal consolidation where the GDP growth will remain in the range of 3.9 to 4.4 percent of GDP,” said one top official of the government while talking to The News here on Thursday.
The budget deficit, which is considered as mother of all economic and financial ills, will be revised upward for the current fiscal year, keeping in view the performance of the revenue and expenditure fronts in the first half of the current fiscal year. The PTI led government wanted to keep the budget deficit at over 5.5 to 5.6 percent of GDP against earlier envisaged target of 5.1 percent of GDP. Without additional tax measures and adjustments into expenditures, the budget deficit might exceed 7 percent of GDP for the current fiscal year.
The real GDP growth rate would be slashed down from earlier projection of 6.2 percent to below 4 percent for the current fiscal year after passing the first half (July-Dec) period of the current fiscal year where Large Scale Manufacturing (LSM) had not performed well. The country had achieved GDP growth rate of 5.8 percent last fiscal year under dispensation of PML-N led regime.
The PTI led government had presented its mini budget in September last after winning the July elections on the pretext that the PML-N led regime had presented the budget for 2018-19 on the basis of wrong projections. However, the macroeconomic targets were never revised downward despite declaring projections on the economic front based on wrong projections.
“With the revision of macroeconomic projections, the government plans to launch renewed efforts to keep the twin deficits, the budget deficit and current account deficit, at manageable levels,” top official sources confirmed to The News here on Thursday.
Initially, the growth of GDP was targeted at 6.2 percent with contributions of 3.8 percent from agriculture, 7.6 percent from industry and 6.5 percent from services sector.
Investment target for the year 2018-19 was kept at 17.2 percent of GDP in order to achieve sustained and inclusive growth. Fixed investment is expected to grow by 15.6 percent of GDP in 2018-19. NationalsSavings as percentage of GDP are targeted at 13.1 percent.
One top official of the Finance Division said that the government was envisaging a decline in GDP growth in the first two years but then it would start picking up and could touch six percent in preceding years. Inflation is envisaged at over 6 percent for the current fiscal year.
The Planning Commission is in the process of finalising the 12th Five Year Plan envisaging average GDP growth rate of 5.8 percent in five years. Starting from 4.2 percent in 2018-19, it could touch 7 percent of GDP in last year of 2022-23. “The Ministry of Finance and Planning Commission are going to hold consultations for evolving a consensus on macroeconomic projections for five years period,” concluded the official.
(This news/article originally appeared in The News on January 11th, 2019)