Tuesday, August 24, 2010

Pakistan economists and government are divided over country’s GDP growth and inflation

The latest flood in Pakistan is one of the biggest floods in the country’s history and it affected the country’s economy and Ministry of Finance claimed that the flood would bring the GDP down to zero and inflation would go up by 25 percent but Pakistani economists do not agree with government’s view.

Sartaz Aziz, ex-finance minister of the country, said that it is too early to make such predictions because only two months have passed of the current fiscal year. He said that the long-term growth of the country would be affected due to cut in development expenditure and asset damage.

Another well known economist, Shahid Hussain, said that the government is intentionally lowering the GDP growth prediction so that they could take credit for the 1.5 percent of 2 percent growth that is expected to happen in the current fiscal year.

He also said that services and industrial sector are the two major sectors of the country as the former contributes 53 percent while the later 26 percent of the GDP and these sectors have not been badly affected by the flood.

Agriculture sector, which is the most affected sector, contributes only 21 percent of the country’s economy.

Jaffer Askari, a former economist of Ministry of Finance, said that inflation at best could increase up to 15 to 16 percent. The Karachi business community is not worried for there was no major loss to Lahore, Gujranwala, Faisalabad, and Sialkot which are considered to be the industrial hubs of the country.

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