ISLAMABAD 8th July: Pakistan is a country where episodes of high growth tend to be shortlived, although longer than low-growth periods.
Regardless of this, over the last 50 years, the average economic growth is around 5.4% per annum – the growth pattern is full of short cycles of rapid growth followed by stagnation.
Growth has been cyclical because of it being input (factors) driven rather than productivity driven. Investment-to-gross domestic product (GDP) ratio stood at only 16% in 2018, implying that there are some other factors which have a significant effect on growth.
In this scenario, it is important to understand the role of total factor productivity (TFP) in order to foster and sustain economic growth. TFP is determined by how efficiently and intensely the inputs are utilised in production or in other words achievement of potential GDP.
However, the growth level in itself can be reached by putting more inputs in production process and through attaining higher levels of output with the same quantity of resources.Few sectors of Pakistan’s economy do show some gains, but Pakistan’s low human development indicators (HDI) undermine economic growth and labour force productivity, with Pakistan being ranked 150th out of 189 countries according to the HDI, far behind most countries in South Asia.
In the Global Competitiveness Index (GCI) 2018-19, Pakistan is ranked 107th with India and Turkey at 58th and 61st places respectively.
Over the last decade, Pakistan gained momentum from sluggish growth, but contributing factors (factors-driven) were still dominant. Growth has been mainly driven by labour and capital accumulation rather than productivity growth, as measured by the TFP (the best overall measure of competitiveness).