Sunday, December 19, 2021

Has Bangladesh Really Left India and Pakistan Behind in Per Capita Income?

Is Bangladesh's officially reported GDP figure credible? Do consumption figures support Bangladesh's claim of higher per capita income than India and Pakistan?  Is it the recent rebasing of GDP that boosted Bangladesh's per capita income above India's and Pakistan's? If Bangladesh has higher GDP per capita, why is its per capita consumption of energy, cement and steel so much lower than India's and Pakistan's? Does Pakistan really have a much larger informal economy than Bangladesh or India do? How long has it been since Pakistan rebased its GDP calculations? Is there a lot more currency in circulation in Pakistan than in Bangladesh and India? Let us try and answer these questions! 

Rebasing GDP:

Bangladesh just rebased its GDP in 2020-21 to year 2015-16. This has boosted its per capita income by double digits for every year since 2015-16.  Bangladesh's per capita income for the 2015-16 fiscal year has now gone up to $1,737 from $1,465 in the old calculation. For the 2019-2020 fiscal, the per capita income has gone up to $2,335 from $2,024.  The new GDP estimate covers 21 sectors, up from 15 sectors previously.  India last rebased its GDP in 2015, a change that bumped up its per capita GDP by double digits. Nigeria's last rebasing in 2012 increased the size of its economy (GDP) by nearly 90%. Pakistan's current base year is 2005-6. Rebasing which is now long overdue will almost certainly increase Pakistan's per capita income by double digits. 

In its 2014 annual report, the State Bank of Pakistan talked about a number of new sectors that are either under-reported or not covered at all: "In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM."

Pakistan's last economic census was done in 2003 and published in 2005, livestock census in 2006  and agriculture census in 2010. The country's economy has changed significantly since then, adding several new economic activities while others may have diminished.  The Quantum Index of Large Scale Manufacturing (QIM) with 2005-06 base year gives a weight to textiles of 20.9% (Yarn 13.7 and cloth 7.2). But the textile industry has significantly changed as reflected in its exports. The value added textiles (non-yarn and non-cloth) now make almost 80% of the total textile exports. These changes are not reflected in current GDP calculations. 


Primary Energy Consumption Per Capita. Source: British Petroleum Statistics 2021

Energy consumption:

Life in modern times is heavily dependent on energy. Per capita energy consumption, a key barometer of economic activity, is significantly lower in Bangladesh than in India and Pakistan.  Use of electricity per capita in Bangladesh is significantly less than in India and Pakistan. 

Energy Consumption Comparison in Bangladesh, India and Pakistan. Source: NationMaster

Commercial energy use (kg of oil equivalent per capita) above refers to apparent consumption, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport. It's only 142 Kg of oil per capita in Bangladesh, much lower than 463 Kg in Pakistan and 494 Kg in India.  

A more recent British Petroleum "Statistical Review of World Energy 2021" puts the per capita primary energy consumption at 9.7 Gigajoules (232 kilogram of oil equivalent) for Bangladesh, 15.7 Gj (375 kgoe) for Pakistan and 23.2 Gj (554 kgoe) for India. 

Per capita consumption of primary energy in Bangladesh has grown by 59% (6.1 Gj to 9.7 Gj) since 2010, much faster than 25% (18.2 Gj to 23.2 Gj) in India and just 6% (14.8 Gj to 15.7 Gj) in Pakistan, according to the British Petroleum's "Statistical Review of World Energy 2021". This indicates much faster economic growth in Bangladesh than India or Pakistan in the last decade. 

Cement Consumption:

Use of cement is another important indicator of economic and development activities, particularly in the infrastructure and housing construction sector.  China and the United States, the world's biggest economies, also have the highest consumption of cement. 

Cement Consumption. Source: International Cement Review

Steel Consumption:

Per capita steel consumption is another important indicator of economic activity in both construction and manufacturing sectors.  It goes into building housing and infrastructure as well manufacturing vehicles and home appliances. The United States and China, the world's biggest economies, are the largest consumers of steel. 

Per Capita Steel Consumption. Source: National Steel Advisory Council

Bangladesh is among the lowest consumers of steel products in the world. Per capita consumption of finished steel in Bangladesh (41 Kg) is lower than the regional peer Myanmar (40.5), India (75.3), Pakistan (45.7), Sri Lanka (53.5), according to the World Steel Association (WSA).

Pakistan's Informal Economy:  

 One way to estimate the size of the informal economy in any country is by looking at the amount of currency in circulation relative to overall money supply. This data is published regularly by all central banks in South Asia and elsewhere. Pakistan's currency in circulation to M2 ratio (about 30%) is more than double the ratios in Bangladesh (13%) and India (15%), indicating that the informal economy in Pakistan is much bigger.

Dr. Lalarukh Ejaz, an assistant professor at the Institute of Business Administration in Karachi, has estimated the size of Pakistan’s informal economy at 56% of the country’s GDP (as of 2019). This means that it’s worth around $180 billion a year, and that is a massive amount by any yardstick. 

Vehicles and home appliance ownership data analyzed by Dr. Jawaid Abdul Ghani of Karachi School of Business Leadership suggests that the officially reported GDP significantly understates Pakistan's actual GDP.  Indeed, many economists believe that Pakistan’s economy is at least double the size that is officially reported in the government's Economic Surveys. 

Back in 2014,  the State Bank of Pakistan stated in its Annual Report as follows: "In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM."  Pakistan's GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011. The recent rebasing of Bangladesh GDP to year 2015 has boosted its per capita income of Bangladesh for year 2016-16 and all subsequent years . The per capita income for the 2015-16 fiscal year has now gone up to $1737 from $1465 in the old calculation For the 2019-2020 fiscal, the per capita income has gone up to $2335 from $2024. Just rebasing the Pakistani economy will result in double digit increases in GDP for the last several years. 

Estimates of Informal Economies in Asia in 2012. Source: IMF

A research paper by economists Ali Kemal and Ahmad Waqar Qasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented. 

Currency in Circulation to M2 Ratio Trends. Source: Business Recorder



Pakistan's Service Sector: 

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. Compared to Bangladesh and India, there is a lot more currency in circulation as a percentage of overall money supply in Pakistan. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year,  a double-digit growth of 10.4% year-on-year.   Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years.  The CIC/M2 ratio is now close to 30%, according to the State Bank of Pakistan. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India. 

Exports as Percentage of GDP in South Asia. Source: World Bank

Exports:

Pakistan has performed poorly in exports growth relative to Bangladesh and India since about 2007. This has been the key source of its balance of payments crises and its repeated need for IMF bailouts. Pakistan's economic growth has essentially been constrained by its recurring balance of payment (BOP) crises as explained by Thirlwall's Law

Summary:

Bangladesh just rebased its GDP in 2020-21 to year 2015-16. This has boosted its per capita income by double digits for every year since 2015-16, raising it above India's and Pakistan's. Based on published data on energy, cement and steel consumption, Bangladesh's claim of having a per capita GDP higher than India's and Pakistan's does not seem credible. In this age of growing energy-intensive industrialization, it does not make sense to have significantly lower use of key inputs like energy to produce higher gross domestic product. For Pakistan, it is important for policymakers to promote ways of documenting more of the economy. It's also important for finance officials to rebase the country's GDP to a more recent year than the year 2006 when it was last done. 

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37 comments:

Omer Salman said...

Sir, they have no minimum wage in Bdesh, please visit Dhaka once to understand the living standard of a below income Pakistani, Indian and Bangladeshi. Since I have seen it all. Let me assure you Pakistan's average urban population is well off. Compare charity ratio vs poverty

Look at the housing projects across Pakistan, none in loss. We have Bumper sales of transport vehicles, not on credit but cash. All cities have piped gas, n electricity. We hv one of greenest power mix the best in Asia . Pakistan offers the best trans. 2 net zero for EU n US ind.


Ranger said...

Auto sales in Pakistan for the year 2020-21 (Including PAMA and Non PAMA members)......... 238,000 units
Bike sales in Pakistan for the year 2019...........2.4 million units


Automobiles registered/sales in Bangladesh for the whole year of 2020...........20,093 units
Bikes sales in Bangladesh for year 2019.....500,000 units

Malik said...

All these 3 countries have 95% UNDOCUMENTED Economy. Hence, It is just not possible to know the exact GDP, which I suspect is much higher than on paper.

Riaz Haq said...

Malik: "All these 3 countries have 95% UNDOCUMENTED Economy. Hence, It is just not possible to know the exact GDP, which I suspect is much higher than on paper"

One way to estimate the size of the informal economy is by looking at the amount of currency in circulation relative to overall money supply. This data is published regularly by all central banks in South Asia. Pakistan's currency in circulation to M2 ratio is more than double the percentages in Bangladesh and India, indicating that the informal economy in Pakistan is much bigger.

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. Compared to Bangladesh and India, there is a lot of currency in circulation in Pakistan. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year, a double-digit growth of 10.4% year-on-year. Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years. The CIC/M2 ratio is now close to 30%, according to the State Bank of Pakistan. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India.

H. Arab said...

It doesn't matter because Pakistan problem isn't GDP but CAD/DEBT. Look at Sri Lanka, practically bankrupt country. Its GDP can crash any day if they default, see Lebanon. Sri Lanka 80% of revenues goes to debt servicing. Pakistan this year 45% of revenue will go to debt servicing.

For India its like 15-20% of revenues going to debt servicing. It doesn't matter how many cars are sold in Pakistan if we cannot control debt and CAD to manageable level like BD and India have done so far.

Khalil said...

Seems Bangladesh's economy is moving positively step by step. In UAE market.
If one refers to exports, India holds the number one slot, which may be due to most of the traders/importers are being Indian nationals and the Indian community being the most larger one.
It is also evident that if Bangladesh is not surpassing but neck to neck with Pakistani products.
About three to four years ago, I was able to find only the 'Leechi Drink (my favourite)' as BD product. Now at any shelf of supermarket, one could find edible oil (Mustard)/biscuits/spices/garments/canned food products from BD. A significant development seen.
Pakistani products are spices (Shan, Mehran, National)/Pickles/Jams/rice/frozen poultry (K&Ns products)/mutton & beef/vegitables (aalo & piyaz seasonal) and fruit (mango & kino) seasonal. Since long same inventory Pakistan is maintaining.
India is far ahead in auto/engineering/elctronics products with Bangladesh and Pakistan is nowhere to seen.

Riaz Haq said...

Cement sales in Pakistan ticked up 6.91% in November 2021 as total offtake stood at 4.82 million tons against 4.5 million tons in the corresponding month of previous fiscal year.

https://tribune.com.pk/story/2332780/cement-sales-pick-up-7-in-november

According to data released by the All Pakistan Cement Manufacturers Association (APCMA) on Monday, domestic cement demand stood at 4.12 million tons in November 2021 compared to 3.74 million tons in November 2020, depicting an increase of 10.21%.

On the other hand, exports of the commodity fell 9.2% from 766,273 tons in November 2020 to 695,779 tons in November 2021.

In November 2021, mills based in the northern region sold 3.47 million tons of cement in the domestic market, which was 10.87% higher than sales of 3.13 million tons in November 2020.

Domestic offtake from mills based in the southern part of the country came in at 654,983 tons during the month under review against 613,113 tons in November 2020, a rise of 6.83%.

Exports from north-based mills plunged 69.67% as the quantity plummeted from 182,091 tons in November 2020 to just 55,234 tons in November 2021.

Meanwhile, foreign shipments from south-based mills rose 9.65% to 640,545 tons in November 2021 while the region exported 584,182 tons in the same month of last year.

Jul-Nov numbers

In the first five months (July-November) of current fiscal year, total cement sales came in at 22.86 million tons, down 4.11% from 23.83 million tons in the corresponding period of previous fiscal year.

Domestic sales of the commodity registered a slight increase of 2.84% to 20 million tons in July-November 2021 as against 19.46 million tons in July-November 2020.

Moving on to exports, foreign shipments of cement fell 34.92% to 2.85 million tons in July-November 2021 from 4.38 million tons during July-November 2020.

North-based mills sold 16.8 million tons of cement in the domestic market during the first five months of current fiscal year, showing a marginal increase of 0.17% compared to 16.76 million tons supplied in July-November 2020.

Exports from the northern region declined 52.56% to 516,003 tons during July-November 2021 against 1.09 million tons in the same period of last year.

Domestic sales by mills based in the southern region stood at 3.22 million tons during July-November 2021, registering a rise of 19.4% as opposed to 2.7 million tons in the same period of previous fiscal year.

There was, however, a substantial decline of around 29.1% in exports from the south as volumes reduced to 2.34 million tons in the first five months of current fiscal year compared to 3.3 million tons during the corresponding period of last year.

Riaz Haq said...

Reviewing the industrial sector, the report said 24pc growth in oil sales was reported by the Oil Marketing Companies. “112pc growth in production of cars shows phenomenal economic activity during the 1QFY22 in the manufacturing sector,” it added.

https://www.dawn.com/news/1660508

Aggregate demand pressures are evident from 84pc rise in car sales in the 1QFY22, 65pc increase in imports and massive spike in demand for consumer credits, it said.

Demand of high-speed diesel has increased by 26pc whilst petrol consumption has risen by 14pc and electricity consumption rose by 13pc during 1QFY22, the report added.

samir sardana said...

It is a simple statistical deconstruct

Laos has a GDP of 17 Billion USD,and a pop of 7 million,which makes a per capita GDP of 2400 USD

India has GDP of 3 Trillion USD,and pop of 1.4 billion

What does the Bangla GDP prove ? It proves that the bulk of the GDP,is a very few hands - like in many nations,of Africa !

It is called inequity !

The higher CIC and per capita usage of steel and cement and power,in Pakistan ,minimum wages in Pakistan,and living standards in Pakistan,PROVES that there is EQUITY in the income distribution,and diffusion of wealth,from the apex of the pyramid.

Steel and Cement is smuggled in large quantities from Bengal and North East India and Chittagong - so that statistic,is misleading.

Power per capita,can be captured, EVEN IF THERE IS POWER THEFT - provided POWER PRODUCTION IS FULLY CAPTURED.dindooohindoo

Bangladesh per capita statistic,is emblematic of inequity.That is the statistical output.

Even in Laos the real wealth is in the hands of a few people,perhaps less than 50,and the GDP comes from plantations,potash,minerals and cocaine.

Anonymous said...

Pakistani products are spices (Shan, Mehran, National)/Pickles/Jams/rice/frozen poultry (K&Ns products)/mutton & beef/vegitables (aalo & piyaz seasonal) and fruit (mango & kino) seasonal.

-----------------

Pakistani Beef exports are considered top quality. If Pakistani embassies & consulates work hard on good marketing, Pak Beef can give serious competition to Wagyu & Kobe.

Pakistani pickles, which are made with renowned Himalayan Pink Salt, are world famous for their exceptional standards of hygienic production.

Multani Chaunsa is considered the Emperor of Fruits. If marketed well, with good washing, packaging & branding, it has the potential to bring in over 150 billion$ in exports.



Riaz Haq said...

Pakistan's cement and clinker exports has reported mixed results between July 2021 and November 2021. According to a research house, exports observed a negative trend on a cumulative basis driven mainly by the political crisis in Afghanistan, as exports from the north reportedly remained disturbed. Elsewhere, exports from southern plants posted nominal growth.

The industry earned US$115.99m in export revenue by dispatching 3.20Mt of cement and clinker overseas in the 5MFY21-22 (1 July-31 November 2021), compared to US$123.67m from 3.73Mt of exports in the year-ago period. Therefore, seeing a decline of 6.2 per cent and 14.6 per cent in dollar terms and quantity, respectively.

However, in November 2021, export revenues surprisingly increased 393.1 per cent MoM to US$50.54m on the shipment of 1.40Mt (+462.7 per cent MoM), compared to US$10.24m from 248,833t of exports in October.

Production in the 4MFY21-22
During July-October 2021, Pakistan's cement production decreased by 2.7 per cent YoY to 15.982Mt from 16.433Mt in the year-ago period. In October 2021 alone, production fell 15.6 per cent to 4.479Mt from 5.123Mt in the same month last year.

https://www.cemnet.com/News/story/171959/pakistan-sees-exports-surge-in-november.html

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Exports of textiles from Pakistan surged in the first five months of current fiscal year with the knitwear sector growing by more than 36 per cent.

https://www.knittingtradejournal.com/flat-knitting-news/14826-welcome-surge-in-pakistan-knitwear-exports

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According to the Pakistan Tanners Association Annual Report (2020-21), foreign shipments of leather and leather products from Pakistan increased by 8.86% from $765.35 million in fiscal year 2019-20 to $833.19 million in fiscal year 2020-21. Former Pakistan Tanners Association chairman Agha Saiddain lamented that in 2007-08, the leather exports stood at $1.25 billion per year and now, they had declined to $833 million.

With regard to the structure of leather exports, according to the Pakistan Bureau of Statistics, around 20% of total exports in fiscal year 2020-21 comprised finished leather, 34% leather garments, 31% gloves, 13% footwear and 2% leather goods.

“It is a strange thing that the export of footwear is less and leather garment is more,” Saiddain said. “The global figures are not like that. In the world, footwear makes up 65% of total leather exports.”

He added that Pakistan had not worked on their footwear sector and there were no joint ventures. Besides, the law and order situation in Karachi was unsuitable for big brands, he said.

Citing that China was the largest producer of footwear and leather goods and Pakistan produced excellent leather for big brands with lower labour costs, he was of the view that there was immense potential for cooperation between the two countries to create a win-win situation. He also suggested inclusion of joint ventures in the Special Economic Zones under the China-Pakistan Economic Corridor (CPEC).

He added that tanneries could process raw material from all over the region in Pakistan including those imported from Uzbekistan, Tajikistan, Iran, Afghanistan and Azerbaijan.

“Currently, we are utilising only 50% of our tanning capacity and 50% more capacity exists. It takes no time in increasing the capacity,” he said.

https://www.leathermag.com/news/newspakistan-leather-exports-surge-9333649

Riaz Haq said...

IT exports increase by 37.57% in five months

https://pakobserver.net/it-exports-increase-by-37-57-in-five-months/

The Information Technology (IT) related exports have witnessed a 37.57 percent growth in the first five months of the current Financial Year (FY).

ICT export remittances, including telecommunication, computer, and information services for the period July-November FY2021-22 have surged to the US $1.051 billion at a growth rate of 37.57% in comparison to the US $764 million during July-November FY 2020-21, said the ministry of Information Technology in a statement here on Tuesday. In November 2021, the ICT export remittances were $221 million at a growth rate of 31.55% as compared to $168 million reported for the month of November 2020.

It is also $26 million higher than export remittances during the previous month October 2021. The net exports for the period July-November FY2021-22 stood $797 million which was 75.83% of $1.051 billion in exports.—APP

Riaz Haq said...

Arif Habib Limited
@ArifHabibLtd
Current Account Balance 5MFY22

CAB: $-7,089mn
Remittances: $12.9bn (+10% YoY)
Total imports: $33.9bn (+60% YoY)
Total exports: $15.1bn (+28% YoY)


https://twitter.com/ArifHabibLtd/status/1473249413598482436?s=20

Full Report

https://arifhabib.com/r/CAD_5MFY22.pdf

Anonymous said...

Remittances at peak 33 billion$ in 2021

https://www.worldbank.org/en/news/press-release/2021/11/17/remittance-flows-register-robust-7-3-percent-growth-in-2021

Riaz Haq said...

Market insiders said around 5 lakh motorcycles were sold (in Bangladesh) in 2019, up 25 percent from 4 lakh previous year, while sales reduced to 311,016 units in 2020 due to the impact of Covid-19.

https://www.thedailystar.net/supplements/world-motorcycle-day-2021/news/motorcycle-industry-regains-sales-2114897

Atlas Honda has recorded the highest ever monthly motorcycle sales in Pakistan. As many as 128,503 units were sold in November 2021, according to the market sources.

https://www.samaa.tv/money/2021/12/atlas-honda-records-highest-ever-motorcycle-sales-in-november/

Sales down by 36 percent for top four two-wheeler companies in India

On December 1, four hours after it released its wholesales numbers for November, Bajaj Auto, which is currently ranked fourth in India, in terms of domestic market share, announced that it had become the No. 1 motorcycle manufacturer in November – domestic and export numbers (3,38,000 units) combined. Hero MotoCorp, which is ranked first in domestic motorcycle wholesale for November, sold 3,29,185 units.

https://www.autocarindia.com/bike-news/sales-down-by-36-percent-for-top-four-two-wheeler-companies-422859

Riaz Haq said...

Motorcycles sales data for 2019 from Statista:

Bangladesh: 650,000

Pakistan: 1,800,000

India: 15,000,000

Riaz Haq said...

Bangladesh: Growth Miracle or Mirage? | Center For Global Development


https://www.cgdev.org/blog/bangladesh-growth-miracle-or-mirage


Bangladesh’s growth stems in large part from its success as an exporter of garments, which account for 84 percent of its total exports, and remittances from overseas, which amount to over 6 percent of GDP (Figure 2). The principal driver of growth is investment, which has risen from 24 percent of GDP in 2000 to 32 percent in 2019. Very little is derived from total factor productivity—below 1 percent per annum since 2000—the primary determinant of long-term growth of incomes for all countries. To paraphrase Paul Krugman, it is perspiration, not inspiration, that is responsible for Bangladesh’s performance to date.


A closer look raises other questions over the quality of this economic record.

First is the extreme dependence on a single category of exports (SITC 841-846) and the low share of exports to GDP. Whereas a country like South Korea managed to diversify away from resource-based products, garments and footwear within a matter of fifteen to twenty years—starting in 1963—and emerged stronger as an exporter of complex products including steel, machinery, chemicals, transport equipment, and consumer electronics, Bangladesh remains focused on a narrow range of relatively low-value garments more than forty years after the industry took root in 1977-1982, following investment by Korea’s Daewoo in Desh Garments and denationalization of the textile industry (Figures 3&4). T-shirts, trousers, sweaters, and shirts remain the dominant export items and 80 percent of exports were to the relatively slow-growing markets in the European Union and the United States. Although Bangladesh has attempted to diversify into pharmaceuticals and can meet most of domestic demand, export earnings were a mere $130 million in 2019.

Second is the falling share of exports in GDP, which fell to 15 percent in 2019 from a peak of 20 percent in 2012, far short of Vietnam’s ratio of 107 percent (Figure 5). In addition, the economic complexity of Bangladesh’s trade has also slipped (that ranking is down from 77 in 1991 to 123 in 2017).

Third, needed diversification is slowed by the weakness of private investment in new industries, which has been exacerbated by constraints on the availability of credit, especially to small and medium enterprises. The entry and growth of firms is also hampered by the deterioration of the business environment: Bangladesh was ranked 65th of 155 countries in 2006 in the World Bank’s Doing Business index. By 2020, it was in 168th place of 190 countries. Bangladesh was ranked 105th by the World Economic Forum’s Global Competitiveness Index for 2019, down two places from 2018.

Riaz Haq said...

Bangladesh now a $409b economy: GDP size up, growth down as new base year takes effect

https://www.thedailystar.net/business/economy/news/gdp-size-growth-down-new-base-year-takes-effect-2211826

For example, Bangladesh's gross domestic product (GDP) grew at a pace of 8.15 per cent in fiscal 2018-19, the highest on record, as per the base year 2005-06. But the growth rate fell to 7.88 per cent as per the new base year of 2015-16.

A base year is a benchmark with reference to which national account figures such as GDP, gross domestic saving and gross capital formation are calculated.

According to the new base year, Bangladesh was an economy of Tk 34,840 billion in current prices in FY21, up 15.7 per cent from Tk 30,111 billion as per the previous base year.

In constant prices, it stood at Tk 27,939 billion in FY21 as per the new base year, up from Tk 12,072 billion as per the old base year, according to a document of the BBS.

In terms of dollars, the GDP size stood at $409 billion in the last fiscal year if Tk 85 per USD exchange rate is taken into account. Per capita income rose to $2,554 in FY21 as per the new calculation, which was $2,227 as per the old one.

Speaking to The Daily Star, Prof Shamsul Alam, state minister for planning, said the adoption of the new base year should have been done earlier.

Although economic growth has fallen as per the new base year, it has painted the real picture of the economy.

"The size of our economy is huge, and the new base year will reflect it," he said, adding that a real scenario would allow the government to make more informed policy decisions.

Zahid Hussain, a former chief economist of the World Bank's Dhaka office, also welcomed the new base year.

He said timely revisions to data on GDP and its components determine the accuracy of national account estimates and their comparability across countries.

With the finalisation of the new series, Bangladesh will be ahead of all other Saarc countries in terms of the recency of the national account's base year.

Only the Maldives (2014) and India (2011-12) come close, while Pakistan (2005-06) and Sri Lanka (2010) are well behind.

"Improved data sources increase the coverage of economic activities as new weights for growing industries reflect their contributions to the economy more accurately," said Hussain.

The last revision was done in 2013.

The size of the agriculture, industry and services sectors has expanded as per the new base year.

The new base year uses data on about 144 crops while computing the contribution of the agriculture sector to the GDP, which was 124 crops in the previous base year.

The gross value addition by the agriculture sector rose to Tk 4,061 billion in current prices in the last fiscal year, up from Tk 3,846 billion in the old estimate, the BBS document showed.

The industrial sector saw the addition of the data on the outputs of Ashuganj Power Station Company, North-West Power Generation Company, Rural Power Company, cold storage for food preservation, Rajshahi Wasa, and the ship-breaking industry.

In the new base year, the gross value addition of the sector stood at Tk 11,362 billion in FY21 while it was Tk 8,944 billion as per the old base year.

The BBS also carried out surveys to cover the contribution of various new services.

The data about growing ride-sharing services, privately run motor vehicles, national flag carrier Biman, private carriers US-Bangla and Novoair, private helicopter services, Bangladesh Submarine Cable Company, motion pictures, cinema halls, new banks, mobile financial services, agent banking, and private healthcare services were included.

The sector's value addition increased to Tk 18,098 billion in FY21 compared to Tk 16,144 billion from the old base year.

In a positive development, the investment-GDP ratio rose to 30.76 per cent in the last fiscal year compared to 29.92 per cent in the old base year of 2005-06.

A BBS official said the new base year would be used while calculating the GDP and other figures from now on.

Riaz Haq said...

Bangladesh's per capita income has increased to $2554 (USD) from $2227, a jump of nearly 16 percent, thanks to a new base year for calculating the country's gross domestic product (GDP).


https://www.tbsnews.net/economy/rebased-gdp-increases-capita-income-almost-16-325273


The government recently finalized 2015-16 as the new base year to calculate (GDP). All national accounts will from now on be based on this new base year. Previously the government was using a base year of 2005-6.

Officials at the Bangladesh Bureau of Statistics (BBS) said the marked increase in the size of the GDP itself and attendant changes in per capita income will accrue mainly due to the inclusion of some new sectors in the calculation and price changes between the two periods.

Rebasing the GDP is the process of replacing an old base year with a more recent base year to keep up with the evolution in prices. In Bangladesh, the usual practice was to revise GDP base year every 10 years. The last time it was done was in 2013, when the base year was changed from 1995-96 to 2005-06.

However economists contend that increased economic growth and per capita income are not translating to a balanced distribution of national income among the people, leading to increased inequality where the benefits of growth are reaped by the few, not the many. Inequality has been further exacerbated during and by the Covid-19 pandemic, they said.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), was one of the economists who raised that point to UNB, even as he conceded there was some benefit from the relatively high economic growth, i.e . GDP growth, and its attendant per capita income growth.

"The ordinary people are benefiting from something. But it remains to be seen whether those gains will contribute to a transformation in the livelihoods of poor people," he added.

The new base year means GDP figures for every year since will also change. As such, the per capita income for the 2015-16 fiscal year has now gone up to $1737 from $1465 in the old calculation

For the 2019-2020 fiscal, the per capita income has gone up to $2335 from $2024.

The news that Bangladesh had surpassed big neighbour India on the per capita income score, a measure of prosperity, caused a big ripple in 2020. According to the International Monetary Fund's (IMF) latest forecast released last month (October), Bangladesh is likely to maintain that lead through to the next fiscal - a shift from its earlier position that India was likely to quickly regain the lead.

But now it estimates Bangladesh's per capita GDP at current prices will be $2,138 in 2021, while India's will be $2,116. The rebasing is likely to bump the lead even higher.

India last rebased its GDP in 2015, a change that had bumped up the figure substantially. Nigeria's last rebasing in 2012 increased the size of its economy (GDP) by nearly 90 percent.

Rebasing is important in emerging economies with large informal sectors such as Bangladesh to capture more and more sections of the informal economy under formal reporting of national income, besides new or budding sectors that are growing fast. The new estimate of GDP comprises 21 broad sectors instead of the previous 15.

Talking to the news agency, a BBS official said the main objective of the project was to sensor modernisation of national accounts and related statistics in line with international guidelines and recommendations.

The other specific objective of the project is to improve different methods of GDP compilation. Updating GDP data series (base 2005-06) from 1972-73 to date, and developing a database on GDP (base 2015-16) from 1972-73 to date using software, will also fall under the project.

Riaz Haq said...

GDP rebasing: no more delays!


https://www.brecorder.com/news/40115951


There is little doubt that the size of Pakistan’s economy is understated. Many economic indictors such as per capita income and debt levels depict bleaker picture than the situation on the ground reflects. When size of the economy is understated, it makes debt to GDP ratio appear unsustainable, in turn weakening government’s bargaining power with lenders such as IMF.

One strong indicator about economic activities in any economy is national electricity consumption. Most readers would be surprise to find out that per capita grid electricity sales are 25-30 percent higher in Pakistan than in Bangladesh. Many commentators point out that GDP per capita has become higher in Bangladesh over the last decade. But it is pertinent to note that while electricity consumption is based on actual data, GDP of any economy is based on many assumptions and estimates and is based on the level of documentation in any economy. Ergo, it would appear that the level of documentation in Bangladesh is significantly higher in Bangladesh than in Pakistan.

Yet, infrastructure and construction actives are significantly greater in Pakistan than in Bangladesh. Domestic annual cement sales in Pakistan are at 48 million tons against 33 million tons in Bangladesh; in per capita terms, the spending is 10 percent higher in Pakistan. Existing road infrastructure is also of better quality and much more extensive in Pakistan (although latter may also be an indicator of greater geographic area). Similarly, number of passenger vehicles in Pakistan – including much more pertinent, vehicle per 1000 persons – is also higher.

The purpose, of course, is not to undermine the economic performance of Bangladesh, and the significant gains made by that country in past two decades. However, it is equally important to engage in undercutting ourselves. Anecdotal evidence suggests that the widely held perceptions of smaller size of economy – exacerbated by lower growth rate in recent years – also contributes to brain drain; as skilled workers seek opportunities elsewhere due to bleak outlook.

Pakistan conducted its last GDP rebasing exercise in 2005-06. GDP rebasing becomes due every ten years, yet it has been much delayed since. Since the PTI government took office, work has been undertaken on the same for the last two years. Yet, the problem is that the post of chief statistician has been vacant for over three years. There are many sectors which have experienced mushroom growth since the last rebasing exercise was completed, and they are not fully recorded in GDP. For example, the value addition segment of textile industry is not recorded in official GDP. Similarly, packaging across many industries is not included. Economic activities is simply much greater than what the official estimation represents.

Then the undocumented cash economy is also growing fast. The velocity of money (computed as nominal GDP divided by broad money – M2) is down from the average of 2.6 during FY10-14 to 2.1 percent during FY17-21. The velocity in any country doesn’t change so abruptly. The catch lies in clamping down on cash economy. The currency in circulation kept on growing since 2015, and falling velocity implies that cash is not coming back into the system. It is turning into a mini-economy unto its own.

The excess average annual CIC (difference between the average CIC/M2 ratio in FY18-21 at 28% to FY10-15 ratio at 22%), of Rs1.2 trillion could have generated undocumented GDP of Rs3.1 trillion at the historic velocity of 2.6. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size.

Planning ministry must bring life to the Bureaus of Statistics (PBS) and speed up GDP rebasing. Once its done, apples can be compared to apples, which can also help restore Pakistan’s negotiating position with global lenders.

Riaz Haq said...

Bangladesh now a $409b economy: GDP size up, growth down as new base year takes effect

Rejaul Karim Byron
Tue Nov 2, 2021 12:00 AM Last update on: Tue Nov 2, 2021 11:36 AM


https://www.thedailystar.net/business/economy/news/gdp-size-growth-down-new-base-year-takes-effect-2211826


The economic growth rates posted in recent years were revised downwards but the size of the economy expanded thanks to a new base year adopted by the Bangladesh Bureau of Statistics (BBS).

For example, Bangladesh's gross domestic product (GDP) grew at a pace of 8.15 per cent in fiscal 2018-19, the highest on record, as per the base year 2005-06. But the growth rate fell to 7.88 per cent as per the new base year of 2015-16.

For all latest news, follow The Daily Star's Google News channel.
A base year is a benchmark with reference to which national account figures such as GDP, gross domestic saving and gross capital formation are calculated.

According to the new base year, Bangladesh was an economy of Tk 34,840 billion in current prices in FY21, up 15.7 per cent from Tk 30,111 billion as per the previous base year.


In constant prices, it stood at Tk 27,939 billion in FY21 as per the new base year, up from Tk 12,072 billion as per the old base year, according to a document of the BBS.

In terms of dollars, the GDP size stood at $409 billion in the last fiscal year if Tk 85 per USD exchange rate is taken into account. Per capita income rose to $2,554 in FY21 as per the new calculation, which was $2,227 as per the old one.

Speaking to The Daily Star, Prof Shamsul Alam, state minister for planning, said the adoption of the new base year should have been done earlier.


Although economic growth has fallen as per the new base year, it has painted the real picture of the economy.

"The size of our economy is huge, and the new base year will reflect it," he said, adding that a real scenario would allow the government to make more informed policy decisions.

Zahid Hussain, a former chief economist of the World Bank's Dhaka office, also welcomed the new base year.

He said timely revisions to data on GDP and its components determine the accuracy of national account estimates and their comparability across countries.

With the finalisation of the new series, Bangladesh will be ahead of all other Saarc countries in terms of the recency of the national account's base year.

Only the Maldives (2014) and India (2011-12) come close, while Pakistan (2005-06) and Sri Lanka (2010) are well behind.

"Improved data sources increase the coverage of economic activities as new weights for growing industries reflect their contributions to the economy more accurately," said Hussain.

The last revision was done in 2013.

The size of the agriculture, industry and services sectors has expanded as per the new base year.

The new base year uses data on about 144 crops while computing the contribution of the agriculture sector to the GDP, which was 124 crops in the previous base year.

The gross value addition by the agriculture sector rose to Tk 4,061 billion in current prices in the last fiscal year, up from Tk 3,846 billion in the old estimate, the BBS document showed.

Riaz Haq said...

Bangladesh now a $409b economy: GDP size up, growth down as new base year takes effect

Rejaul Karim Byron
Tue Nov 2, 2021 12:00 AM Last update on: Tue Nov 2, 2021 11:36 AM


https://www.thedailystar.net/business/economy/news/gdp-size-growth-down-new-base-year-takes-effect-2211826


The industrial sector saw the addition of the data on the outputs of Ashuganj Power Station Company, North-West Power Generation Company, Rural Power Company, cold storage for food preservation, Rajshahi Wasa, and the ship-breaking industry.

In the new base year, the gross value addition of the sector stood at Tk 11,362 billion in FY21 while it was Tk 8,944 billion as per the old base year.

The BBS also carried out surveys to cover the contribution of various new services.

The data about growing ride-sharing services, privately run motor vehicles, national flag carrier Biman, private carriers US-Bangla and Novoair, private helicopter services, Bangladesh Submarine Cable Company, motion pictures, cinema halls, new banks, mobile financial services, agent banking, and private healthcare services were included.

The sector's value addition increased to Tk 18,098 billion in FY21 compared to Tk 16,144 billion from the old base year.

In a positive development, the investment-GDP ratio rose to 30.76 per cent in the last fiscal year compared to 29.92 per cent in the old base year of 2005-06.

A BBS official said the new base year would be used while calculating the GDP and other figures from now on.

Riaz Haq said...

Bangladesh now a $409b economy: GDP size up, growth down as new base year takes effect

Rejaul Karim Byron
Tue Nov 2, 2021 12:00 AM Last update on: Tue Nov 2, 2021 11:36 AM


https://www.thedailystar.net/business/economy/news/gdp-size-growth-down-new-base-year-takes-effect-2211826

In constant prices, it stood at Tk 27,939 billion in FY21 as per the new base year, up from Tk 12,072 billion as per the old base year, according to a document of the BBS.

In terms of dollars, the GDP size stood at $409 billion in the last fiscal year if Tk 85 per USD exchange rate is taken into account. Per capita income rose to $2,554 in FY21 as per the new calculation, which was $2,227 as per the old one.

Speaking to The Daily Star, Prof Shamsul Alam, state minister for planning, said the adoption of the new base year should have been done earlier.


Although economic growth has fallen as per the new base year, it has painted the real picture of the economy.

"The size of our economy is huge, and the new base year will reflect it," he said, adding that a real scenario would allow the government to make more informed policy decisions.

Zahid Hussain, a former chief economist of the World Bank's Dhaka office, also welcomed the new base year.

He said timely revisions to data on GDP and its components determine the accuracy of national account estimates and their comparability across countries.

With the finalisation of the new series, Bangladesh will be ahead of all other Saarc countries in terms of the recency of the national account's base year.

Only the Maldives (2014) and India (2011-12) come close, while Pakistan (2005-06) and Sri Lanka (2010) are well behind.

"Improved data sources increase the coverage of economic activities as new weights for growing industries reflect their contributions to the economy more accurately," said Hussain.

The last revision was done in 2013.

The size of the agriculture, industry and services sectors has expanded as per the new base year.

The new base year uses data on about 144 crops while computing the contribution of the agriculture sector to the GDP, which was 124 crops in the previous base year.

The gross value addition by the agriculture sector rose to Tk 4,061 billion in current prices in the last fiscal year, up from Tk 3,846 billion in the old estimate, the BBS document showed.

The industrial sector saw the addition of the data on the outputs of Ashuganj Power Station Company, North-West Power Generation Company, Rural Power Company, cold storage for food preservation, Rajshahi Wasa, and the ship-breaking industry.

In the new base year, the gross value addition of the sector stood at Tk 11,362 billion in FY21 while it was Tk 8,944 billion as per the old base year.

The BBS also carried out surveys to cover the contribution of various new services.

The data about growing ride-sharing services, privately run motor vehicles, national flag carrier Biman, private carriers US-Bangla and Novoair, private helicopter services, Bangladesh Submarine Cable Company, motion pictures, cinema halls, new banks, mobile financial services, agent banking, and private healthcare services were included.

The sector's value addition increased to Tk 18,098 billion in FY21 compared to Tk 16,144 billion from the old base year.

In a positive development, the investment-GDP ratio rose to 30.76 per cent in the last fiscal year compared to 29.92 per cent in the old base year of 2005-06.

A BBS official said the new base year would be used while calculating the GDP and other figures from now on.

Riaz Haq said...

Bangladesh rebased GDP now official in national accounting


https://unb.com.bd/category/Bangladesh/rebased-gdp-now-official-in-national-accounting/82864

The planning minister said the net of various products as GDP has expanded under the new base year. As a result, per capita income has increased. At the same time, GDP growth has increased.

The average per capita income has risen to $2,554 from $2,226 previously.


Agriculture sector: About 20 new crops have been added to the crop sub-sector with all the data included in this sector for GDP calculation. New crops include dragon fruit, strawberry, capsicum, latkan, kachushak, sharufa, malta etc. Cattle and poultry production data, new survey data in the forest sector and other up-to-date information have been included. As a result value addition from the agriculture sector increased in the GDP by 14.80 per cent.


Industrial Sector: Earlier, all the data included in this sector for calculating GDP included updated data from New Manufacturing Industry Survey (SMI) and construction sector survey, data from household waste collection. Overall current prices of value addition in the industrial sector have increased by 36.1 per cent.

Services sector: New survey of transport sector, Uber, Pathao, data of new private helicopter companies, new survey of real estate sector, data of mobile banks, agent banks, information of non-profit organizations of government and education and health sector have all been included. Overall, the size of value addition in the services sector showed growth by 14.3 percent in the sector.

Riaz Haq said...

South Africa has rebased its gross domestic product (GDP). The how and the why


https://theconversation.com/south-africa-has-rebased-its-gross-domestic-product-gdp-the-how-and-the-why-167309

What is the GDP of an economy? There are three definitions. All are equivalent. GDP can be measured:

as the value of the final goods and services produced by an economy in a particular period (a year, or a quarter); or

as the sum of value added in an economy in a particular period; or

the sum of incomes in the economy in a particular period.

So why the need to periodically rebase an economy’s GDP? Because economies change over time, in particular developing ones. How often rebasing is done in a country like South Africa depends on resources and priorities. Statistics South Africa used to do rebasing exercises every five years. Rebasing was done in 1999, 2004, 2009 and 2014. It has taken a bit longer for the latest one because of the pandemic.

The frequency matters because of the structural transformation in an economy, inflation and technological progress. For instance, during the process of economic development, or of structural transformation, economies go through a process of urbanisation, where more and more people live, study, work and produce goods and services in cities. This leads to the growth of certain sectors, such as services and manufacturing which are more productive and demand more human capital compared with sectors like agriculture. The effect of this is that the relative importance of the agricultural sector diminishes as services and manufacturing increase.

This process of structural transformation is general. Countries like the US and the UK have all gone through it. South Africa is going through it right now.

The change means that the weight of particular sectors changes in the measurement of GDP. For example, if there are less and less people working in agriculture, wages in that sector will be different than five years ago. If general prices are increasing inflation has to be taken into account and fast technological progress affects prices and wages – and demand and supply of human capital – as well.


Government agencies that calculate GDPs use a base year. For instance, Statistics South Africa, before the latest rebasing, was using 2010 prices to get the real South African GDP. To get to the real GDP in 2018, the South African nominal GDP in 2018 was being multiplied by a 2010 price index.

And prices change, not only because of inflation, but also because of changes in quality. Think of an intel processor and how it has changed its speed over time, or how banking used to be done in 2010 – in the branch – and how it was done in 2018 – on the smart phone.

Nominal and real changes happen in an economy over time. Therefore the need for periodical rebasing so that the data are always accurate.

We do not expect dramatic changes attached to rebasing exercises happening every five years. South Africa is a developing economy, which has been changing and growing over time, but its growth rates are not as dramatic as say, a country like China. So, we expect some changes, but not dramatic ones.

For example, services have had substantial (but not dramatic) positive changes with the rebasing – in other words it has increased in relative size to other sectors.

To make sense of that, just think in terms of the massive developments around the city in areas such as Rosebank and Sandton. All those new buildings are being occupied by people providing services, and with human capital. In two words, structural transformation.

Riaz Haq said...

Arif Habib Limited
@ArifHabibLtd
During CY21, industry recorded highest ever MoGas sales of 8.6mn tons. Moreover, total industry sales surged by 19% YoY to 20.8mn tons during CY21.

https://twitter.com/ArifHabibLtd/status/1478004863250440193?s=20

Riaz Haq said...

Arif Habib Limited
@ArifHabibLtd
Total (oil) industry sales (in Pakistan) surged by 19% YoY to 20.8mn tons during CY21.

https://twitter.com/ArifHabibLtd/status/1478004887761952770?s=20

Riaz Haq said...

Pakistan Natural Gas: Consumption was reported at 3.978 billion Cub ft/Day in Dec 2020

This records a decrease from the previous number of 4.302 billion Cub ft/Day for Dec 2019

Bangladesh's natural gas consumption for 2020 was 2.937 billion cubic feet per day in Dec 2020

India's natural gas consumption for 2020 was 5.75 billion cubic feet per day in Dec 2020


https://www.ceicdata.com/en/indicator/pakistan/natural-gas-consumption

Riaz Haq said...

Pakistan to rebase it GDP to 2015-16

https://www.thenews.com.pk/print/915868-rebasing-of-national-accounts-to-be-carried-out

The World Bank (WB) has validated the overall methodology for conducting the rebasing exercises in Pakistan and pointed out some deficiencies in respective areas, which could be rectified within the next few days.

The Pakistan Bureau of Statistics (PBS) is ready to present the re-basing of national accounts exercise before the high-powered technical committee, Governance Council and then Economic Coordination Committee of the Cabinet (ECC).

With this exercise, some key economic indicators will be improved but some will be further worsened. For instance, with the ballooning of GDP growth, total public debt in percentage of GDP will be improved. However, the FBR’s tax-to-GDP ratio may be worsened.

"We have accomplished 36 surveys/studies out of total assigned 42 exercises for changing the base year from 2005-06 to 2015-16 to calculate figures of national accounts as it will help ballooning the overall GDP growth rate in a substantial manner,” top official sources confirmed to The News.

“The re-basing of National Accounts will be accomplished within the current fiscal year and provisional GDP growth figure for 2021-22 will be calculated on the basis of rebasing exercise."

Top official sources said there are some practical difficulties in the way of rebasing of national accounts as the PBS conducted 42 studies on various sectors of the national economy to finalise weights on the basis of the latest data compiled in the fiscal year 2015-16. The PBS conducted different studies in the last four years. Earlier, such studies were conducted by consultants through the private sector but for the first time it was being done by the PBS itself, so the quality of the done studies needs to be thoroughly scrutinized before granting approval for rebasing of national accounts on the basis of 2015-16.

The last rebasing of national accounts was done in 2005-6 during the Musharraf/Shaukat Aziz regime. Earlier, the rebasing was done in 1999-2000 after a period of 20 years, so it was decided that the rebasing exercise would be done after five years. The economic census was also done in 2005-6 and the national accounts were re-based on the basis of the same data, so it was decided that the rebasing of national accounts should be done after a period of 10 years.

The PBS captured the data on the stipulated time-frame but for accomplishing all other requirements, it took almost four years for conducting other studies. Now it is hoped that the rebasing exercise will be implemented to change the base year from 2005-6 to 2015-16 because in 10 years, there are many ground realities changed. So fresh data capturing methodology should be devised to get a more realistic picture of the national economy.

Riaz Haq said...

Deficient data
By Ishrat HusainDecember 24, 2021

https://www.thenews.com.pk/print/919381-deficient-data

In most countries, the national accounts are revised at intervals of five years or so. GDP at current and constant factor prices in Pakistan is still derived from the 2005-06 base, for which some of the surveys were carried out several years before the base year. The 2015-16 rebasing exercise has been completed for quite some time and is in danger of becoming redundant because of new capacity, new activities and new sectors that have emerged since these surveys were undertaken. Rebasing and extrapolation to the current year would show a substantial increase in the size of the economy, and per capita income providing a more realistic picture. Of course, the result of the rebasing is likely to lead to uproar by certain quarters as it would show decline in debt, fiscal and current account deficits/ GDP ratios and a lowering of tax, imports and exports ratios etc relative to GDP. The present ratios are misleading and do not guide policymakers in taking the right remedial actions.

----------------

Let me give one specific example of the unreliability and inaccuracy of the present data. The Quantum Index of Large Scale Manufacturing (QIM) with 2005-06 as base year gives a weight to textiles of 20.9 percent (Yarn 13.7 and cloth 7.2). If we examine the exports of textiles, the value added textiles (non-yarn and non-cloth) form almost 80 percent of the total textile exports. All the large exporting houses producing value added goods are not reflected in this weightage for LSM. So the critics rightly point out as to how exports are growing when the yarn and cloth output are declining.

The QIM is constructed in an ad-hoc manner by combining the data from the Oil Companies Advisory Committee (11 items), the Ministry of Industries and Production (36 items), and the Provincial Bureaus (65 items) reporting changes on a monthly basis in the components of the index. Not only is the methodology questionable, the coverage is also incomplete and inaccurate. The provincial bureaus – except Punjab – do not have the capacity to collect the primary information and therefore rely on the industry sources (which usually understate production to evade taxes) or secondary data.

Any correlations with the usage of inputs or electricity or gas consumption are not attempted to verify the authenticity and whatever raw data is reported goes into the index unvarnished. Decisions on export or imports of sugar were made on the basis of the production data provided by the sugar millers which subsequently was found to be erroneous. The same is the case with cement, fertilisers, automobiles etc output data that is included without validation or independent verification.

The last Census of Manufacturing Industries (CMI) which was used in the National Accounts and QMI was that of 2005-06. CMI 2015-16 was completed a few years ago and my information about Punjab shows there is quantum jump in the index compared to what we are using at present. The PBS and the Planning Commission should have made the switch but it hasn’t been done so far. This would affect our national accounts and the industry sector but also the services sector whose value added is dependent on the quantum of commodity producing sectors.

Riaz Haq said...

Deficient data
By Ishrat HusainDecember 24, 2021

https://www.thenews.com.pk/print/919381-deficient-data


The last economic census was held from April 2003 to December 2003 and published in 2005, agriculture census in 2010, and livestock census in 2006. These censuses are critical in estimating the intercensal growth rates and also updating the samples for surveys from which the sectoral estimates for agriculture, livestock, micro, small and medium enterprises are derived. The Mouza Census was conducted in 2020 but its findings are still awaited. How can we have any confidence in the reliability of the present estimates when the underlying universe has changed significantly during this period, adding new economic activities while others may have disappeared from the scene? In addition, there is no unified national data center where various databases can be integrated, and thus there is too much fragmentation and very little aggregation across the silos. .
--------

The ECC had taken decisions on imports and exports of wheat, and sugar based on the crop reporting system of the provincial governments and Household Income and Expenditure Survey data but both the production and consumption data kept on changing from one meeting to the other as reported in the media. If the PBS can do a fine job in rebasing, expanding coverage and providing urban and rural price indices separately of the price statistics and decision support system, it is puzzling as to why this cannot be done in the case of the National Accounts, Labour Survey, Pakistan Living Standards Measurement

The agenda on which the PBS should work in the near term is: one, announce the results of rebasing of National Accounts 2015-16 and extend the series to date keeping the old series in parallel for one year. Two, hold or complete a new economic census, agriculture census, livestock census. Three, release the results of the Census of Manufacturing Industries CMI 2015-16 immediately and the QIM reconfigured its findings. Four, publish Quarterly National Accounts and Gross Provincial Products accounts regularly. Five, redesign and carry out a labour survey data including nominal and real wages every year and its methodology, coverage and definitions brought in line with the regional countries. Six, the PSLM Survey data /HIES show a lot of gap in income and expenditure compared to National Accounts. Their design, sample size and coverage may be revisited.

Riaz Haq said...

Pakistan’s GDP size expands increased by 11.3%t o $346.76 billion in FY21 showing growth of 5.37%


https://www.app.com.pk/business/pakistans-gdp-size-expands-to-346-76-bn-in-fy21-showing-growth-of-5-37/


The National Accounts Committee (NAC) Thursday approved the revised figures of Pakistan’s Gross Domestic Product (GDP) growth rate of 5.37% against the provisional numbers of 3.9% for the fiscal year 2020-21 (FY21).

According to the final numbers approved by the committee, the per capita increased to Rs 266,614 or US$ 1,666 in 2020-21 while the size of the economy reached to US$ 346.76 billion.

The Committee also accorded approval to the change of base of National Accounts from 2005-06 to 2015-16.
The 104th meeting of the NAC was held here under the Chairmanship of Secretary ministry of Planning, Development & Special Initiatives Abdul Aziz Uqaili.

Due to improved coverage and better estimation of input output structure of industries, the gross value addition has increased by Rs. 3.1 trillion in the base year 2015-16 from Rs. 27.4 to Rs. 30.5 trillion, showing an increase of 11.3% in the Gross Value Added (GVA) for the base year 2015-16.

This shows that in the previous base of 2005-06 economy was under estimated by 11.3%. Agriculture showed an increase of 8.3% from Rs. 6.7 to 7.3 trillion, industry grew by 11.9% from Rs. 5.3 to 5.9 trillion and services enhanced by 12.5% from Rs. 15.3 to 17.3 trillion.

With rebasing and level shift of economy from Rs. 29.1 trillion to Rs. 32.7 trillion in 2015-16, the GDP at market prices increased to 55.5 trillion in 2021, and Gross National Income increased to Rs. 59.3 trillion.

The per capita income increased to Rs 266,614 or US$ 1,666 in 2020-21. The size of the economy reached to US$ 346.76 billion.


According to a press release issued by the ministry of Planning, the Ministry and Pakistan Bureau of Statistics (PBS) have decided to devise a mechanism to rebase National Accounts as well as price statistics after every five years in line with the best practice adopted by the most of the countries of the world, as both go in tandem to capture more areas and activities, which have taken place in the last couple of years.

The PBS being a National Statistical Organization has to comply with the international standards while compiling national indicators of economy.

The methodology adopted in the re-basing is in line with the 2008 System of National Accounts (SNA). During 2014-15 to 2016-17, the PBS has conducted about 45 census, surveys, and studies to properly capture the economic activities in the country.

The results of these census, surveys, and studies have already been reviewed by internal and World Bank experts.
Efforts have been made to include new economic activities. Dedicated surveys and studies have been
conducted to capture the share of economic activities in the economy. Input output ratios of various
industries have been updated, which has resulted in better reflection of their contribution in the
economy.


Riaz Haq said...

Country registered 14-year high GDP growth in 2021 despite COVID-19: Asad Umar

https://www.geo.tv/latest/394351-asad-umar-claims-record-economic-growth-despite-being-hit-by-covid-19


Last fiscal year, country’s economic growth rate recorded an all-time high in 14 years at 5.7%, minister says.
Says major industries also succeed in maintaining the growth rate at 15% which is more than average.
In last two weeks, Opposition came up with two failed narratives, PTI leader says.

FAISALABAD: Federal Minister for Planning, Development, and Special Initiatives Asad Umar claimed on Thursday that despite being hit by COVID-19, Pakistan’s economy witnessed record development under the leadership of Imran Khan, Geo News reported.

Coronavirus had badly affected the world’s economy, but last year, Pakistan’s economic growth shot up as compared to the last 14 years, he said.

Talking to journalists in Faisalabad, the PTI leader shed light on the economy and said that during the last fiscal year, the country’s economic growth rate was forecast at 3.4% but it recorded an all-time high in 14 years at 5.7%.

Coronavirus has battered the world’s economy, but under the leadership of Imran Khan Pakistan’s economy is progressing toward development, he added.

The federal minister further said that the last year, the growth of industries recorded a 15-year high, while major industries also succeed in maintaining the growth rate at 15% which is more than average.

Historic increases in the production of wheat were recorded while potato, tomato, onion, and natural gas and crude oil production also shot up.

Umar also lashed out at the Opposition, saying that in the last two weeks, it came up with two failed narratives.

"I pity for them (the Opposition) as the government vanquished them in National Assembly after passing bills with a majority," he said.

Riaz Haq said...

Pakistan Quantum Index of Manufacturing (QIM) rebased

https://www.brecorder.com/news/40148481

ISLAMABAD: The government has rebased Quantum Index of Large Scale Manufacturing Industries (LSMI) from 2005-06 to 2015-16 with increasing the total 112 items with cumulative weight of 70.3 percent for computation to 123 items having total weight of 78.4 percent, where, the Ministry of Industries and Production weight has been decreased from 49.556 percent in the QIM 2005-06 to 40.54 percent in QIM 2015-16.

The Pakistan Bureau of Statistics (PBS) has released a report on the rebasing of Quantum Index of Large Scale Manufacturing Industries (QIM) from 2005-06 to 2015-16, which stated that the weights presently used for the QIM were derived from the Census of Manufacturing Industries (CMI) 2005-2006. Total 112 items with cumulative weight of 70.3 percent are being used for computation of QIM.

The production data is collected from Oil Companies Advisory Council (OCAC), Ministry of Industries and Production (MOIP) and Provincial Bureaus of Statistics (BOS).

Moreover, to keep QIM more reliable, update and to overcome the challenges, the current QIM is rebased on the basis of results of CMI 2015-16. The rebased QIM has been computed with 123 items having total weight of 78.4 percent derived from the CMI 2015-16 with all existing data sources with addition of the PBS internal data source.

It further stated that new weights have been derived at two stages, the weight at industry level have been derived on the basis of gross value added (GVA) of Large Scale Manufacturing Industries (LSMI) at the basic prices.

The total GVA for the LSMI is taken as 100 and percentage contribution of each industry has been considered as the weight of that industry.

Riaz Haq said...

Arif Habib Limited
@ArifHabibLtd
The NAC, in its 104th meeting, reviewed the change of base of National Accounts from FY06 to FY16. With this revision, the final estimates of GDPg of FY21 came out to be 5.57%.

Full report
https://arifhabib.com/r/GDPg.pdf

Riaz Haq said...

Arif Habib Limited
@ArifHabibLtd
Historic high-power generation registered in CY21, 136,572 GWh, up by 10.6% YoY. The sharp inflection in economic activity post supportive measures by the Gov’t/SBP remained instrumental in achieving this growth.

https://twitter.com/ArifHabibLtd/status/1484519832921989122?s=20

-------------------

Arif Habib Limited
@ArifHabibLtd
*Power Generation up by 9.3% YoY during 1HFY22*

Dec’21: 8,828 GWh, +12.0% YoY
1HFY22: 74,396 GWh , +9.3% YoY

https://twitter.com/ArifHabibLtd/status/1484511672001871878?s=20

Riaz Haq said...

What is GDP rebasing?

https://profit.pakistantoday.com.pk/2022/01/23/the-gdp-finally-rebased/

Every few years, the GDP of a country is rebased to keep up with the evolution of prices in the economy. It is the process of replacing an old base year with a more recent base year. What this means is aggregates at constant prices are recalculated in terms of more recent prices. This gives a reference point to which future values of the GDP are then compared to.

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If we put this in simple terms, let’s say an economy makes only apples. In Year 1, it produced 10 apples priced at Rs 1 per apple. That makes the GDP Rs 10. 8 years laters, let’s say the economy makes 20 apples. With the old base, the GDP would be Rs 20. However, the prices of apples have gone up to Rs 1.5 per apple making the GDP worth Rs 30. With the old base, the GDP was understated by 50%. The new base accurately presents the economy.

GDP is rebased to capture the real and reliable estimates of GDP. The Gross Fixed Capital Formation (GFCF) is done by enlarging the sphere and coverage of macroeconomic data and estimates as per the guidelines of the System of National Accounts.

Rebasing the GDP allows Pakistani policy makers to use data that is a better representation. “With these measures, economy size will be more reflective of the ground realities. After rebasing, the change in economic indicators shows a mixed picture,” says Fahad Rauf, Head of Research at Ismail Iqbal Securities.

When was this last done?

Essentially, this should be done once every five years. Moreover, the international best practice includes introducing new accounting conventions, improved methods of estimation, and revised statistical classifications every decade.

The last rebasing of GDP was undertaken in 2005-6 while President Musharraf and Prime Minister Shaukat Aziz were in office. Prior to that, rebasing was done in 1999-2000 after a period of 20 years. The first rebasing/ linking was done in 1959-1960. The second, in 1980-81, the third in 1999-2000, fourth in 2005-06.

The National Accounts Committee also devised a mechanism to rebase the national accounts every 5 years. This means, another rebasing is likely to happen soon. Earlier, the World Bank (WB) had validated the overall methodology for conducting the rebasing exercise in Pakistan and had pointed out some deficiencies that could be worked on.

Rebasing of national accounts was difficult for PBS. The PBS has conducted 42 studies on various sectors of the economy to finalize weights on the basis of the latest data compiled in the fiscal year 2015-16. In the past, consultants in the private sector would undertake these surveys and studies on behalf of the PBS, however, this is the first time the PBS is carrying it out themselves. Therefore, the time taken to go forward with the rebasing is also due to the fact that thorough scrutiny of PBS methodology and output was done before granting approval for rebasing of national accounts.

Earlier, the Pakistan Bureau of Statistics rebased the LSM index to 2015-16 from 2005-6. This allowed for the weights of various sectors to change, and for the PBS to add garments, with a weight of 6%, as a category to the index.

What really is GDP and how is it calculated?

The Gross Domestic Product of a country has been one of the most discussed topics in our everyday activities. The initial basic concept of GDP was invented in the late 18 th century. However, it was later developed by an American economist in 1934 and accepted as the primary measure of an economy soon after in 1944. Most of us have a solid understanding of GDP and what it represents. In layman terms it is the total monetary value of all final goods and services that have been produced within the geographical boundaries of a country over a selected period.