Another tale of missed targets
Once again the Survey disappoints. Interestingly, the finance minister found reason to celebrate the provisional 4.2 percent GDP growth figure – which missed the set target of 5.1 percent by almost a whole percentage point – because it was still better than last year’s 4.03 percent. But Dar sb shouldn’t be surprised if few beyond the kitchen cabinet share his enthusiasm. Still, we have now had two years of growth, however miniscule, after two pretty stagnant years, so there is the upward trajectory, at least, to celebrate. It’s a different story, of course, that the 5-7 percent band needed to accommodate the workforce still remains a distant dream.
For some reason the rest of the region has attained that band. There is good news on the inflation front, no matter how much the collapse in international Brent crude – down by a good 50 percent – had to do with it. The tight monetary regime of the last few years played no small part. But there is still no room for complacency. A simple look at more diverse statistics is sobering. Despite the significant fall in prices, our five year average is still above the regional average. And high interest rates have now given way to a very loose monetary policy. Interest rates are at a 42-year low, and with the government as eager as always to borrow from the money market, there is a real risk of diluting the easy money environment. That is especially true since foreign investment remains shy, and our own investors are more interested in ports like Dubai to park their monies.
Then there is the other crucial indicator to consider. The government made so many promises about taxes on its campaign trail that it almost had everybody believing that a significant increase in the tax-to-GDP ratio was just around the corner. Yet Mian sb has overseen a pretty unimpressive drive to expand the tax net so far. At 7.5 percent, this year’s number is an embarrassment even to last year’s 10.2 per cent, and among the lowest in the world. That, partly, explains the GDP growth paralysis as the rest of the region marches forward. With earning compromised, and rulers unable to back promises of improvement, it is difficult to see successive Surveys impressing any more than this one.
