Wednesday, July 11, 2018

Pakistan GDP Growth 1960-2017: How Does Pakistan Compare With China and India?

The latest GDP figures in terms of current US dollars released by the World Bank for 2017 put Pakistan's GDP at $305 billion, India's at $2,597 billion and China's at $12,237 billion.  The World Bank also lists where the gross domestic products of each country in current US dollars stood in 1960.

GDP Growth in Current US$ 1960-2017. Source: World Bank

Economic Growth Since 1960: 

The World Bank report released in June, 2018 shows that Pakistan's GDP has grown from $3.7 billion in 1960 to $305 billion in 2017, or 82.4 times. In the same period,  India's GDP grew from $37 billion in 1960 to $2,597 billion in 2017 or 71.15 times. Both South Asian nations have outpaced the world GDP growth of 60 times from 1960 to 2017.

While Pakistan's GDP growth of 82X from 1960 to 2017 is faster than India's 71X and it appears impressive, it pales in comparison to Malaysia's 157X, China's 205X and South Korea's 382X during the same period.

India-Pakistan GDP Growth Compared to the World 1960-2017. Source: World Bank



Economic Growth Since 1998:

In spite of all of the multiple challenges on several fronts that Pakistan continues to face, the country's 5X GDP growth over the last two decades is not too shabby when compared with India's 6.5X jump in the same period. Here are the figures for several countries from Spectator Index:

China:  13X growth in  GDP from $1 trillion in 1998 to $13.1 trillion in 2018

India: 6.5X growth in GDP from $400 billion in 1998 to $2.6 trillion in 2018

Pakistan: 5X growth in GDP from $62 billion in 1998 to $310 billion in 2018

United States: 2.2X growth in GDP from $9 trillion in 1998 to $20 trillion in 2018

Japan: 1.25X growth in GDP from $4 trillion in 1998 to $5 trillion in 2018

Per Capita Incomes:

Pakistan has not done as well in terms of per capita income growth for several reasons including poor governance and corruption since 2008 and faster population growth than in China, India and other countries. Per Capita income in Pakistan grew 22% since 2012, half of the 43% growth in India during the same period. China topped with 48% in per capita income since 2012.

Here are per capita income growth figures for selected countries since 2012:

China: 48%, India: 43%, Turkey: 32%, Indonesia: 29%, Pakistan: 22%, UK: 15%, US: 15%, Japan: 15%, Germany: 13%, Canada: 13%, France: 11%, Saudi Arabia: 10%, Greece: 9.5%, Russia: 8%, Italy: 8%, Nigeria: 7.5% and Brazil: 0%.

Per Capita GDP Comparison. Source: Hindustan Times


Pakistan has lagged its peers in per capita income growth over the last 5 decades. Pakistan's economic performance is especially disappointing relative to Asian Tigers like Malaysia and South Korea.  Pakistan was on a similar trajectory as the Asian Tigers during 1960s under Gen Ayub Khan's rule. GDP growth in this decade jumped to an average annual rate of 6 percent from 3 percent in the 1950s, according to Pakistani economist Dr. Ishrat Husain. Dr. Husain says: "The manufacturing sector expanded by 9 percent annually and various new industries were set up. Agriculture grew at a respectable rate of 4 percent with the introduction of Green Revolution technology. Governance improved with a major expansion in the government’s capacity for policy analysis, design and implementation, as well as the far-reaching process of institution building.7 The Pakistani polity evolved from what political scientists called a “soft state” to a “developmental” one that had acquired the semblance of political legitimacy. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined."


Pakistan Growth By Decades. Source: National Trade and Transport Facility

Since 1947, Pakistan has seen three periods of military rule: 1960s, 1980s and 2000s. In each of these decades, Pakistan's economy has performed significantly better than in decades under political governments. The worst decade for Pakistan's economy was 1990s, also known as the lost decade, when the GDP grew just 4% as Benazir Bhutto and Nawaz Sharif took turns to mismanage it.

Pakistan's GDP growth in decades under military rule has been 1.5-2.5% faster on average than under civilian rule. Though the difference of 1.5% in GDP growth appears small, it would have made a huge difference when compounded over multiple decades and put Pakistan in the ranks of Asian Tigers.

Summary:

Pakistan has defied repeated dire forecasts of doom and gloom since its independence.  According to the report released in June, 2018 shows that Pakistan's GDP has grown from $3.7 billion in 1960 to $305 billion in 2017, or 82.4 times. In the same period,  India's GDP grew from $37 billion in 1960 to $2,597 billion in 2017 or 71.15 times. Both South Asian nations have outpaced the world GDP growth of 60 times from 1960 to 2017.  Pakistan's economy has grown 500% over the last two decades in spite of political corruption and serious security challenges and instability created by the Afghan war next door and Indian sponsored proxy war against it.  Pakistan's GDP growth in decades under military rule has been 1.5-2% faster on average than under civilian rule. Though the difference of 1.5% in GDP growth appears small, it would have made a huge difference when compounded over multiple decades and put Pakistan in the ranks of Asian Tigers.

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8 comments:

Habibullah said...

With all the development projects now in the pipeline and also with the induction of a new democratic government next month we can expect a steady and faster growth ofGDP in the coming years

Ahmad F. said...

Just dividing the beginning and ending numbers can create an unexpected distortion in the growth rates. It is safer to compute the year-by-year growth rates and to average them. Even better to plot out the graphs or run a regression analysis.

Manish said...

A better way to get a snapshot of South Asia is to look at IMF data 1980-2016 PPP per capita. PK was the richest of all three major economies (PK, IND & B) in 1980 & India in 2016.

[per capita $ ppp] [1980] [2016] [Growth%] [Growth%(per annum)]

PAKISTAN 916 5174 464.85 4.93
BANGLADESH 510 3841 653.14 5.77
INDIA 557 6599 1084.74 7.11

Riaz Haq said...

After 5.8% growth in #GDP in FY 2017-18, #Pakistan’s #economy is $313.13 billion as of June 2018, says the nation's central bank

https://tribune.com.pk/story/1762089/2-size-pakistans-economy-313-13-billion-says-sbp/

The size of Pakistan’s economy stood at $313.13 billion at the end of June, 2018, according to provisional figures released on Thursday by the country’s central bank, as a weaker currency took toll on gross domestic product (GDP) in dollar terms.

Pakistan’s GDP stood at $304.97 billion at the end of June, 2017, and the economy registered a 13-year high GDP growth rate of 5.8% in FY18. That said, the size of the economy shrunk in dollar terms as the rupee weakened against the greenback in four separate rounds since December 2017, with a 5.8% growth rate effectively reduced to 2.7%.


The State Bank of Pakistan (SBP) used a period average month-to-month exchange rate to calculate the GDP, which according to calculations came to around Rs108 to the US dollar. With the rupee having weakened further, the size of the economy is likely to have shrunk even more in dollar terms. The currency is currently hovering around the Rs128-mark as depleting foreign exchange reserves and a widening current account deficit create a headache for economic managers that are at a loss to save the country from a balance of payments crisis.

The SBP has already increased the key interest rate by 175 basis points since January, taking it to 7.5% to tackle increasing inflationary pressure in the months to come.

Additionally, the 5.8% growth registered during FY18 is also not enough for a developing economy like Pakistan to absorb the number of job seekers that pile up each year. According to experts and global financial institutions, Pakistan needs at least 7% growth to create enough jobs and tame rising unemployment. However, the country is likely to face a slowdown in growth during the ongoing fiscal year as tighter policies to improve macroeconomic stability have a negative impact.

Ratings agencies, Moody’s and Fitch, have already lowered their forecast for Pakistan’s GDP growth, while the World Bank has also suggested that it will slow down to near 5% in FY18.

According to additional figures released by the SBP, Pakistan’s current account deficit stood at $17.99 billion in FY18, translating to 5.7% of GDP and more than twice than the government’s own estimates.

Anonymous said...

https://www.wsj.com/articles/chinas-global-building-spree-runs-into-trouble-in-pakistan-1532280460?mod=hp_lead_pos5

Riaz Haq said...

Emerging Markets Crisis Alert #Currencies of #Argentina, #Ukraine, #Egypt, #Turkey, and #Brazil have depreciated against dollar by 80.3%, 69.0%, 60.9%, 60.5%, and 42.5%, respectively, over 5 years. #EmergingMarkets #currencies #Pakistan #rupeealltimelow

https://seekingalpha.com/article/4189448-emerging-markets-crisis-alert

Emerging market countries might be facing an economic crisis.

16 emerging market countries borrowed $3.4 trillion from foreign lenders, but their foreign exchange reserves amounted to $1.3 trillion.

The currencies of Argentina, Ukraine, Egypt, Turkey, and Brazil have depreciated against dollar by 80.3%, 69.0%, 60.9%, 60.5%, and 42.5%, respectively, over 5-year period.

The percentage of exports per GDP were 98.6% for Vietnam, 75.2% for Malaysia, 65.0% for Belarus, 47.9% for Ukraine, 37.4% for Mexico, and 35.7% for Morocco in 2017.

Emerging market countries would be facing high currency, liquidity, inflation, interest rate, default, and emerging market risks due to the shortage of foreign exchange reserves, strong dollar trend, and trade war.

Foreign Exchange Reserves
Emerging market (EM) countries might be facing an economic crisis. The EM countries on the above chart do not have sufficient amount of foreign exchange reserves to pay off external debts. The 16 EM countries borrowed total of $3.4 trillion from the foreign lenders. The 16 EM countries' foreign exchange reserves amounted to $1.3 trillion, which is short by $2.1 trillion to pay off the external debts. (See the below chart) The external debts are riskier than domestic debts because foreign lenders would accept payments only in foreign currencies. For example, as of first quarter of 2018, Turkey's foreign exchange reserves were $134 billion, but Turkey borrowed $467 billion from foreign lenders who would accept payments in foreign currencies such as U.S. dollar (dollar), not in Turkish lira. Turkey would not be able to pay back foreign lenders because it does not have sufficient amount of foreign exchange reserves to pay off external debts. The shortage of foreign exchange reserves can cause an economic crisis in EM countries.

Riaz Haq said...

If you score more than 33% on Hans Rosling's quiz abut basic facts about the state of health and wealth in the world today, you know more about the world than a chimp

Read more at: https://inews.co.uk/news/long-reads/hans-rosling-factfulness-statistics/


Excerpt of Factfulness by Hans Rosling


Page 201.


This is risky but I am not going to argue it anyway. I strongly believe that liberal democracy is the best way to run a country. People like me, who believe this, are often tempted to argue that democracy leads to, or its even a requirement for, other good things, like peace, social progress, health improvement, and economic growth. But here's the thing, and it is hard to accept: the evidence does not support this stance.

Most countries that make great economic and social progress are not democracies. South Korea moved from Level 1 to Level 3 (Rosling divides countries into 4 levels in terms of development, not the usual two categories of developed and developing) faster than any other country had ever done (without finding oil), al the time as a military dictatorship. Of the ten countries with the fastest economic growth, nine of them score low on democracy.

Anyone who claims that democracy is a necessity for economic growth and health improvements will risk getting contradicted by reality. It's better to argue for democracy as a goal in itself instead of as a superior means to other goals we like.

https://books.google.com/books?id=j-4yDwAAQBAJ&printsec=frontcover&dq=factfulness+hans+rosling&hl=en&sa=X&ved=0ahUKEwjW-v7KwPzcAhUgHDQIHZreB1IQ6AEIKTAA#v=onepage&q=Of%20the%20ten%20countries%20with%20the%20fastest%20economic%20growth%2C%20nine%20of%20them%20score%20low%20on%20democracy.%20&f=false

Riaz Haq said...

Indians Are Leaving India in Droves, Most Going to Muslim Nations. Exodus Speeds Up Under Modi's Rule

https://economictimes.indiatimes.com/nri/migrate/indians-are-leaving-the-country-in-droves-heres-where-they-are-headed-and-why/articleshow/96847173.cms

India had the largest diaspora population in the world with 18 million people from the country living outside their homeland in 2020, according to a report by the United Nations.

According to the 'International Migration 2020 Highlights', by the Population Division of the UN Department of Economic and Social Affairs (UN DESA), the UAE, the US and Saudi Arabia host the largest number of migrants from India.

In 2020, 18 million persons from India were living outside their country of birth. Other countries with a large diaspora population included Mexico and Russia (11 million each), China (10 million) and Syria (8 million).

India's large diaspora is distributed across the United Arab Emirates (3.5 million), the United States of America (2.7 million) and Saudi Arabia (2.5 million). Other countries hosting large numbers of Indian migrants included Australia, Canada, Kuwait, Oman, Pakistan, Qatar and the United Kingdom, the report said.

Renouncing citizenships
More than 1.6 million Indians have renounced their citizenship since 2011, including 1,83,741 in 2022, according to government data.

The United States remains the main draw for Indians moving abroad and gaining citizenship in other countries.

As many as 1,63,370 Indians renounced their citizenship to become citizens of other countries in 2021, according to latest government data.