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

[Riaz Haq]

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 Fa...

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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[Riaz Haq]

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-313-1...

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.

[Riaz Haq]

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]

Among #SouthKorea’s 44 defense ministers, only 6 (14%) have been civilians, i.e. people who had not served as career #military officers. Since 1961, no civilian has served as defense minister. Current defense minister Han Min-koo is a former #army general. https://thediplomat.com/2017/06/thaad-illuminates-problems-in-south...

Civil-military relations, which refer to the relationship between the civilian political leadership and the military, have been widely studied due to the latent danger of a state’s military usurping control from civilian authorities. As Socrates once said, soldiers protect the state from external threats, but they themselves are also potential threats to society. For this reason, limits must be placed on the military’s role within a society, and civilian control of the military has been accepted as a norm within democratic regimes — political leaders set policy (ends), while the military use their military expertise to devise strategies (means) to implement that policy. This is essential for the democratic system, where civilian political leaders exercise the authority delegated to them by the people to rule. Thus, unelected soldiers must obey decisions made by political leaders. To this end, in most democracies civilians hold top national security posts. In the United States, active-duty military officers are prohibited from assuming key posts, and retired officers must be removed from active duty for a certain period of time — seven years in the case of secretary of defense (although an exception was made by congress for Jim Mattis earlier this year).

South Korea lacks such restrictions on the military. According to Ki-joo Kim, a South Korean researcher, among the country’s 44 defense ministers, only six (14 percent) have been civilians, i.e. people who had not served as career military officers. Since 1961, no civilian has served as defense minister. The incumbent, Han Min-koo, is a former army general who had served as the chairman of the Joint Chiefs of Staff less than three years prior to taking on his new role. Another important national security post, chief of the National Security Office, was until last month held by Kim Kwan-jin, an army general who also served as the chairman of the Joint Chiefs of Staff shortly before serving as defense minister.

Some have argued that given South Korea’s unique security circumstances, where it remains technically at war with a nuclear foe, the civilianization of top national security leadership is risky. However, the argument that leaders should be equipped with military expertise is based on ignorance of the role of civilian leadership in national security. Such ignorance is particularly problematic for a country that experienced a brutal military dictatorship from 1960 to 1988. Because the top national security positions, ostensibly charged with civilian control over the military, are in fact monopolized by military officers, there is a higher danger of the military interfering in politics and threatening civilian leadership in the future.

The recent events related to THAAD are indicative of this danger. The missile defense system was initially planned to be deployed by the end of 2017. However, the last administration rushed to complete the deployment before Moon, a critic of THAAD and the leading candidate throughout the presidential campaign, could take office. It is no secret that two former generals, Kim Kwan-jin (chief of the National Security Office) and Han Min-koo (minister of national defense), oversaw this deployment as civilian leadership was incapacitated due to the impeachment and later removal of President Park Geun-hye, Moon’s predecessor. Kim and Han presented the THAAD deployment as a fait accompli to the new president, even though THAAD has wide-ranging consequences in the areas of South Korean politics, diplomacy, and economy. This shows a clear failure of civilian control over the military.

[Riaz Haq]

Could #China’s model of growth be its biggest global #export ? #Beijing’s reluctance to define its "model" makes it difficult for others to follow. It prefers alternatives such as “Chinese path”, “Chinese experience”, “Chinese wisdom” & “Chinese approach” https://www.scmp.com/news/china/diplomacy/article/3139351/could-chi...



The Chinese model gained favour as Africa wearied of the free-market capitalism and deregulation that characterised Western-style neoliberalism.
The failure of neoliberal economic policies in fostering social and economic development across the continent has caused political reorientations in Africa
Tim Zajontz
Tim Zajontz, a research fellow at South Africa’s Stellenbosch University, said China positioned its model as an alternative to Western-style democracy, which became a source of inspiration for other African countries such as Zimbabwe, Zambia and Tanzania.
“The failure of neoliberal economic policies in fostering social and economic development across the continent has caused political reorientations in Africa, with China’s economic trajectory frequently being invoked as a viable alternative development model,” Zajontz said.
Orville Schell, Arthur Ross director of the New York-based Asia Society’s Centre on US-China relations, agreed. “China has provided a successful authoritarian developmental model that has worked at home, and is thus seductive to other developing countries that have had difficulty organising their body politics, catalysing their economies with growth and keeping social order. The ‘China model’ has produced economic progress … if people are willing to live in an authoritarian, even totalitarian political environment. There is a trade-off,” Schell said.

China’s Ethiopian ambitions suffer setback with telecoms decision
29 May 2021
However, as Beijing pulls out all the stops to mark the centenary of the ruling party’s establishment on July 1, there is still no consensus on what the China model actually is.
Just over a decade ago after the global financial crisis in 2008, the Chinese government even refused to acknowledge the existence of such a model, or weigh in on the discussions about whether the China model was reality or just something possible.
Instead, a number of retired officials, including former vice-president of the party’s Central Party School Li Junru, cautioned against using the term, citing its possible negative impacts on China’s relations with the world and its domestic development.
In a commentary on Study Times, the school’s flagship newspaper, in December 2009, Li said the notion of China model was factually incorrect and dangerous because it led to “self-satisfaction and blind optimism” and tended to stereotype the country’s ongoing reform experiment.
The ‘China model’ has produced economic progress … if people are willing to live in an authoritarian, even totalitarian political environment
Orville Schell
In the decade since, a group of Chinese academics and intellectuals have also questioned the validity of the Chinese model. Renowned economists Zhang Weiying and Wu Jinglian warned against promoting it, saying it would undermine reform at home and fuel divide and confrontation with the West. Tsinghua University historian Qin Hui argued in 2010 that unlike the rise of China, the rise of the China model, featuring a low level of human rights and welfare, was by no means good news for the country and the world.
It was not until after President Xi Jinping took office in late 2012 that the “China model” finally won official blessing.
“With the rise of China’s national strength and global standing, discussions and studies on the ‘Beijing consensus’, ‘Chinese model, and ‘Chinese road’ have gathered pace in the world,” Xi told senior party cadres at an internal meeting in January 2013.