47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Chapter 8Trade and PaymentsThe unfavorable global environment has sloweddown the world output and trade volume during2011; world output which grew by 5.3 percent in2010 decelerated to 3.9 percent in 2011. Thisslowing down of the global economic activity hascaused a sharp decline in the growth of worldtrade. Against the strong pick up of nearly 13.0percent in 2010 the growth of world trade droppedto 5.8 percent in 2011. The global economicslowdown and consequential decline in the growthof world trade has also depressed the internationalcommodity prices. The prices of non-fuelcommodities witnessed a deceleration from 26.3percent in 2010 to 17.8 percent in 2011; and, areprojected to grow negatively by 10.3 percent in2012.These developments can be attributed to theongoing European Sovereign Debt Crisis, theturmoil in the Arab Countries and the naturaldisasters that hit Thailand and Japan which causeddisruptions in the supply chain.The growth in world output and trade volume isprojected 1 to decelerate further during 2012 due tothe downside risks of deepening of the sovereigndebt crisis and worsening financial stress, increasein oil prices, and geo-political risks. It is projectedthat world output will grow by 3.5 percent andtrade volume will increase by 4.0 percent duringthe period.Amid the difficult global economic environment,the slowing down of the world trade, the drop ininternational commodity prices, and the energyshortages domestically, the exports from Pakistanremained higher by US$ 14.0 million during July-April 2011-12 over the same period last year andstood at $ 20,474 million. During the period July-April 2011-12, the growth of imports at 14.5percent remained more or less the same as thecorresponding period’s growth in the previousperiod. So as exports declined imports continued togrow highlighting the dominant role of externaldevelopments. Pakistan’s exports growth wouldhave been in much better position had there beennormalization in international prospects during theperiod. In fiscal year 2011-12, workers’remittances grew by $ 1.83 billion over the lastyear.Current Account BalanceThe current account deficit stood at $ 3,394 millionduring July-April 2011-12.This deficit in thecurrent account was largely caused by thewidening of trade and services account deficit.However, continued support from current transfersin the form of workers’ remittances helped incontaining further increase in the current accountdeficit during the period under review.The trade deficit expanded mainly due to the 14.5percent growth in imports and the 0.1 percentincrease in exports; thereby widening the tradedeficit by 49.2 percent during the period. Themajor factor behind the widening of the tradedeficit was the sharp rise in the import bill duringJuly-April 2011-12 which increased due to thehigher international prices of crude oil1 : World Economic Outlook April 2012, IMF111