ISLAMABAD - The PTI led government has said that it would achieve the annual growth target of 4.8pc during current fiscal year but it is likely to miss other targets including industrial sector growth, restricting inflation and deficits in current and trade accounts.

“Despite considerable international geo-political downside risks and emerging commodities super cycle phenomena, it is expected that the economy will reach around the original NEC economic growth target of 4.8pc for FY22,” said Ministry of Planning, Development and Special Initiatives in Mid-year economic review July-December (1HFY2021-22). It has projected that industrial sector may witness slight slippage against the target but the services sector is likely to surpass the target.

Agriculture sector outturns are likely to exceed its envisaged targets of Annual Plan FY22 given the developments in the lead indicators of the sectors available for 1HFY22. Kharif crops are at final stage of harvesting and early output estimates of all three major crops are higher than for the comparable period of last year. The initial estimates of 8.4 million bales output are unlikely to be realized but final output will still exceed the last year’s cotton output of 7.1 million bales.

Sugarcane production is estimated at 87.7 million tons from an area of 1.3 million hectares, showing an increase of 8.7pc and 8.2pc in area and production, respectively, over the last year. The rice production is estimated at 8.8 million tons from an area of 3.5 million hectares showing an increase of 5.8pc and 5.0pc in area and production, respectively. The maize production for 2021-22 is estimated at 9.0 million tons from an area of 1.4 million hectares.

Wheat production target of 28.9 million tons from an area of 9.2 million hectares has been set by FCA in October. The ongoing short supplies of fertilizers and irrigation water / less rains during Rabi 2021-22 will be the major limiting factors to achieve wheat output target. Below average rains during the sowing season, lesser availability of irrigation water (28%) and anticipated weather conditions may hamper the growth of Rabi crops. The water availability for Rabi season is lower by 27% as compared to the last year.

Large Scale Manufacturing has recorded a growth of 7.4pc during 1HFY22 as compared to 1.2pc over the corresponding period of FY21. The automobile sector has recorded an annual growth of 69.4pc. Iron and steel, leather, paper & board sectors are the other major contributors toward this growth whereas, the rubber products and pharmaceuticals adversely affected growth in LSM index.

During 1HFY22, total cement dispatches were lower by 0.9pc than the corresponding period of last year. Cement dispatches for the domestic market have increased by 1.9pc and exports declined by massive 32.5pc for this period.

Foreign Direct Investment during 1HFY22 has witnessed growth of 20pc as compared with the same period of last year. For domestic investment, credit to private sector is a lead indicator. Credit to the private sector has crossed Rs.1 trillion-mark for the first time in the history of the country. Credit offtake by the private businesses has reached Rs. 904b during 1HFY22, against offtake of Rs.246b during the same period of last year. SECP has incorporated the highest number of companies in a calendar year by registering 5764 companies which is 48% higher than 2020.

FBR tax collections during 1HFY22 registered growth of 32.5pc over same period of last year. This tax collection is 50pc of the full year target for tax collections. Non-tax revenue decreased by 14.3pc. Net revenue of the federal government has increased by 8.5pc in 1HFY22 whereas total expenditure grew by 17.6pc. FBR taxes that primarily originated from imports and taxes collected at import stage accounted for 47pc of all net collected taxes. Imports in the period are up by 66% and taxes at import stage are up by 62%. Direct taxes are up by 24% in 1HFY22 but taxes collected on domestic economic activity are up by 14pc.

The average inflation was recorded at 9.8pc during 1HFY22 as compared to 8.6pc in the comparable period of last year. Sensitive Price Index (SPI) averaged 15.0pc during 1HFY22 compared to 8.9pc in the comparable period of last year. However, SPI for the month of December 2021 stood at 19.3pc compared to 7.9pc in December 2020 which reflects sharp spike in the inflationary pressures.

The current account posted a deficit of $9.1b (5.7pc of GDP) for 1HFY22 as against a surplus of $1.2b (0.9pc of GDP) last year.

Services account deterioration is primarily caused by higher shipment cost. Imports related to transport services increased by 101pc and its major contribution came from 100pc increase in sea transport.

The surge in merchandized imports is phenomenal – which grew by 66.2% during the 1HFY22. Total increase in imports during 1HFY22 (on shipment basis) is $16.3b and it is explained by petroleum group ($5.4b), vaccine & medicine ($2.6b), raw materials ($2.1b), iron and steel ($1.7b), road motor vehicles ($1b) and textiles ($730 million). Import of textile machinery surged by 88pc and textile group imports surged by 44pc.

Exports (fob) grew by 28.9pc during 1HFY22 and reached $15.2b ($11.8b last year). Increase in exports was across the board with textile leading with a growth of 26pc followed by food group (22pc), petroleum (32pc) and other manufacturing exports (14pc).

Export of services registered 22pc growth with significant increase of 38pc in ICT related exports. Import of services registered much faster growth of 38pc that led to widening of services trade balance.

The Ministry has hinted that inflation would remain on the higher side in current fiscal year. The previous inflation projection will be surpassed by fair margin. However, the targets set for the external sector will be partially achieved, with import target likely to be breached by a fair margin leading to higher than projected deficits in current and trade accounts. Fiscal developments are also reliant on fiscal measures proposed in the recently introduced Supplementary Money bill in the Parliament. Based upon developments in the 2HFY22, staying close to the FY22 overall fiscal deficit target is likely to be challenged by additional cost of  Covid related vaccines and social protection.

Agriculture sector is expected to achieve envisaged full year growth target of 3.5% keeping in view impressive performance of Kharif crop and prospects of good wheat crop. However, agriculture growth is mainly contingent upon availability of certified seed and pesticides during the Rabi season. Moreover, consistent availability of water and agriculture credit facilities will also help to support achieving the targeted growth.

Industry sector was projected to grow by 6.5pc based upon LSM target of 6pc. However, with the revised full year number of LSM for FY22, achieving targeted 6pc growth is now unlikely. Moreover, high cost and low supplies of energy inputs is another challenge for the manufacturing sector. Construction sector is expected to post healthy growth due to the construction amnesty scheme and concessional credit availability for the housing sector.