United Nations Economic and Social Commission for Asia and Pacific (ESCAP) in its annual report said that despite challenging security conditions and severe energy shortages, domestic economic activity rebounded to some extent in fiscal year 2010, with economic growth accelerating to 4.1 percent from 1.2 percent in 2009. “The Economic and Social Survey of Asia and Pacific 2011” which was launched from 28 locations across the world including Pakistan and said that floods across the country from August to October 2010 added to the existing difficulties of the economy.
More than 20 million people were affected by the floods while private and public losses due to floods are estimated at $9.7 billion and its immediate growth prospects and GDP growth is expected to fall to 2.8 percent in 2011. The report said that Pakistan has been experiencing double-digit inflation over the past three years. In 2010, inflation stood at 11.7 percent, having decelerated from 20.8 percent in 2009.
The ESCAP report also noted that budget deficit remains high and called for urgent fiscal consolidation adding that in the case of Pakistan lower revenue generation and higher current expenditures are the underlying reasons for the stressed fiscal situation. Without substantially increasing the resource envelope, it would be difficult to sustain the fiscal deficit at manageable levels and similarly, it urged for carefully scrutiny of expenditure and reprioritised spending to create room for public investment to support growth.
The budget deficit stood at 6.3 percent of GDP in 2010 and will be under sustained pressure in 2011 as a result of the devastation wreaked on the economy by the severe floods and the consequential rehabilitation and reconstruction activities, it added. The report said that the external current account deficit came down to two percent of GDP in 2010 from 5.7 percent of GDP in 2009. The improved performance in 2010 was helped by the relatively strong recovery of exports, which grew at 9.4 percent in 2010 while imports continued to contract, although at the much smaller rate of 0.3 percent. Oversea worker remittances grew by 14 percent and reached close to $9.0 billion in 2010, helping to reduce the current account deficit. With the overall balance of payments in surplus, foreign exchange reserves reached an all-time high of about $17 billion by the end of fiscal year 2010, it added.
