Column by Dr. Farrukh Saleem
Is the economy turning around? The good news is that the economy is growing at its fastest pace since 2008. The bad news is that inflation remains a potent threat. Is the economy turning around? Well, there are economic indicators that turn around before the economy as a whole turns around. These indicators have a certain degree of predictability value and are thus known as leading economic indicators.
Is the economy turning around? Has the private sector started borrowing? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident it starts borrowing and when it starts borrowing it starts investing and once it invests the economy turns around.
In July 2013, within a month of the new government taking over, the Overseas Investors Chamber of Commerce and Industry (OICCI) reported that “there is remarkable buoyancy in business circles coinciding with the change of government…. Business sentiments have gone up dramatically from minus 34 percent to positive 2 percent.” Lo and behold, in the first six months of 2013-14 credit to the private sector has gone up from Rs53 billion last year to Rs231 billion – an increase of 4.35 times.
Is the economy turning around? Are investors incorporating new companies? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident the Securities and Exchange Commission of Pakistan (SECP) experiences an increased number of entrepreneurs approaching the SECP for the registration of new companies. Lo and behold, the incorporation of new companies has gone up by a wholesome 17 percent from the 1st of July, 2013 to the 30th of November, 2013 as compared to the same period in 2012.
Is the economy turning around? Is the private sector importing machinery? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident it begins to import machinery. Lo and behold, machinery import is up 26 percent. When the private sector becomes confident it begins to construct. Lo and behold, as of February 2014, local cement dispatches have gone up by a healthy nine percent.
The theory behind leading economic indicators is that they turn positive prior to the economy turning positive. Question: Is the economy finally turning around? Answer: Leading economic indicators are painting an optimistic scenario.
The biggest threat remains terrorism for which the government has ad-hocism in place of strategy. In the monetary domain, the State Bank of Pakistan’s independence has been compromised and that cannot be good for anything financial. The other threat is from the stream of external payments that are bound to keep the economy under pressure.
Yes, there are other threats as well. Among them: the budgetary deficit, bank lending to the government, a sharp decline in net foreign assets, an anaemic revenue base and expenditures running way ahead of revenues.
On the ground there are three growth prerequisites: political certainty, economic certainty and policy predictability. According to the World Bank, “A range of governance and business environment indicators suggest that deep improvements in governance are needed to unleash Pakistan’s growth potential.”
“Economics is extremely useful as a form of employment for economists” – Galbraith
The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com
Twitter: @saleemfarrukh
Is the economy turning around? Has the private sector started borrowing? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident it starts borrowing and when it starts borrowing it starts investing and once it invests the economy turns around.
In July 2013, within a month of the new government taking over, the Overseas Investors Chamber of Commerce and Industry (OICCI) reported that “there is remarkable buoyancy in business circles coinciding with the change of government…. Business sentiments have gone up dramatically from minus 34 percent to positive 2 percent.” Lo and behold, in the first six months of 2013-14 credit to the private sector has gone up from Rs53 billion last year to Rs231 billion – an increase of 4.35 times.
Is the economy turning around? Are investors incorporating new companies? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident the Securities and Exchange Commission of Pakistan (SECP) experiences an increased number of entrepreneurs approaching the SECP for the registration of new companies. Lo and behold, the incorporation of new companies has gone up by a wholesome 17 percent from the 1st of July, 2013 to the 30th of November, 2013 as compared to the same period in 2012.
Is the economy turning around? Is the private sector importing machinery? To be certain, the economy will only turn around if and when the private sector becomes confident. When the private sector becomes confident it begins to import machinery. Lo and behold, machinery import is up 26 percent. When the private sector becomes confident it begins to construct. Lo and behold, as of February 2014, local cement dispatches have gone up by a healthy nine percent.
The theory behind leading economic indicators is that they turn positive prior to the economy turning positive. Question: Is the economy finally turning around? Answer: Leading economic indicators are painting an optimistic scenario.
The biggest threat remains terrorism for which the government has ad-hocism in place of strategy. In the monetary domain, the State Bank of Pakistan’s independence has been compromised and that cannot be good for anything financial. The other threat is from the stream of external payments that are bound to keep the economy under pressure.
Yes, there are other threats as well. Among them: the budgetary deficit, bank lending to the government, a sharp decline in net foreign assets, an anaemic revenue base and expenditures running way ahead of revenues.
On the ground there are three growth prerequisites: political certainty, economic certainty and policy predictability. According to the World Bank, “A range of governance and business environment indicators suggest that deep improvements in governance are needed to unleash Pakistan’s growth potential.”
“Economics is extremely useful as a form of employment for economists” – Galbraith
The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com
Twitter: @saleemfarrukh
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