The healthy growth numbers are slightly deceptive given the low base effect .
To put things in perspective:
The upward revision of GDP growth at market prices (mp) from 7.2% to 7.8%, in real terms, in 2022 is of negligible significance. The revision of the growth figure for 2022 (+0.6 percentage points) is accompanied by a drop in the growth figure for 2021 (-0.2 percentage points).
The GDPmp in 2022 is therefore forecast at Rs488 billion, representing only Rs2 billion, or 0.4% more than before the revision, and would increase marginally from 94.9% to 95.3% of the GDP of 2019. The country would still not recover all the Covid losses in 2022. This would only be possible in 2023 with a growth of 5% which would raise the GDP to Rs512 billion by the end of 2023.
The revision of real GDP mp growth from 7.2% to 7.8% (+0.6%) is also accompanied by an upward revision of inflation (GDP deflator) from 7% to 9 %, resulting in nominal growth higher from 14.6% to 17.6%. It is mainly inflation that is driving up GDP in nominal terms.
Can Govt take credit for the growth surge ?
Or is it just automatic? - a recovery driven by a continuing uptick in consumption growth from 2.1% in 2021 to 4% in 2022 and tourists coming back in numbers more or less in line with the global trend, though we still have a lower expenditure per tourist than our competitors.
What has government policies to do with it ?
Le us have a look at the numbers: Public sector investment as a % of GDP at market prices has dropped from 5.2 to 3.9; In real terms, Public Investment in 2022 is still around 66% of the 2019 level. Though exports is showing a high 11.9 % growth , in real terms it is still 8% lower than our 2019 level of exports. More worryingly , net exports of goods & services as a % of GDP at market prices has deteriorated from -7.2 in 2019 to -9.1 in 2022 and the Current Account deficit will more than double to over 10% of GDP in 2022..
With inflation entrenched at 12.1%, consumption on the rise and the gradual change in the stance of monetary policy to contractionary from accommodative, the 2023 growth target of 5% may turn out to be quite challenging to realise.
