Rebasing effect: FY21 GDP touches 5.6%

January 21, 2021 (MLN): The National Accounts Committee (NAC) yesterday announced the rebasing of prices used for the calculation of Gross Domestic Product (GDP) to 2015-16 from 2005-06, which expanded the size of the economy to $347 billion and Pakistan’s FY21 GDP growth to 5.6%.

The event coincided with the revised FY21 GDP estimate approved by the NAC, which jumped from 3.9% (based on 9MFY21 numbers) to 5.4%, marking the second-highest growth in fourteen years. With rebasing effect, the FY21 GDP further inches up by 20bp to 5.6%. This resulted in a 16% revision in FY21 nominal GDP to Rs55.5 trillion, calculated at $347 billion.

While the rebasing favours most of the optics of GDP denominated performance metrics such as Debt position, CAD and Fiscal Deficit, indicators such as Tax collection and Market Capitalization as % to GDP are negatively affected, JS Global in its research note said today.

The report highlighted that an upward adjustment in nominal GDP is negative for metrics like tax-to-GDP. Though this also takes Pakistan’s equity market a step back with the market cap as % of GDP dropping by 230bps to 13.9%, it does not make a substantial change in the country’s ranking when compared to regional peers that range from 20%-70% of GDP.

According to the report, rebasing of GDP still doesn’t capture the whole GDP that Pakistan has to offer.

From its last rebasing exercise, when GDP was rebased to 2005-06, Pakistan has undergone many changes in technological advancements in order to improve production, optimize costs, etc. More specifically, with the flurry of investment in tech-based start-ups targeting Generation Z.

While the rebasing is important to reflect a more updated view of the economy, However, a more accurate assessment of the quantum and size of Pakistan’s GDP requires efforts to capture and quantify the grey economy, the report concluded.

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