Does Pakistan's Real GDP Exceed One Trillion US Dollars?

A 2024 joint study of the International Labor Organization and the Small and Medium Enterprise Development Authority  (SMEDA) estimated Pakistan's undocumented economy at $457 billion. While other South Asian nations, particularly Bangladesh and India, do include estimated undocumented GDP figures in their official GDP, Pakistan's official GDP figures do not include such estimates. If the Pakistani government decides to include estimates of the informal economy in its official figures, the country's GDP would jump to $1,059  billion in market exchange terms and over $4,000 billion in PPP terms. 

Pakistan's Total GDP, including Undocumented, Estimated at over $1 Trillion


In 2023 when the ILO-SMEDA study was conducted, Pakistan's official GDP was $340 billion (34% less than the undocumented GDP), bringing the total real GDP for 2023 to $797 billion. Pakistan's official GDP figure for 2025-26 is projected to be $452 billion. Assuming that the undocumented GDP has grown at the same rate as the official GDP, the undocumented GDP today works out to $607 billion, bringing the total GDP (documented and undocumented) to over $1 trillion. In terms of purchasing power parity, the total national economy, including the informal economy, is estimated to be over $4 trillion, which translates to over $16,000 per capita. 

Being the largest employer, Pakistan's undocumented sector acts as a critical shock absorber for the labor force and sustains millions of low-income households. But it also restricts the government tax collection which could be invested in education, healthcare and infrastructure development. There is a temptation in Pakistan to force documentation of the entire economy as the Indian government has attempted to do. However, it will create a mass unemployment problem as many small businesses would be forced to close. 

India is an example of what can go wrong in attempting to bring the informal sector into the tax net too quickly. Demonetization and GST taxes together have decimated the informal sector. But the Indian government continues to significantly overestimate its annual economic growth, particularly by misjudging the size and trajectory of the country's informal (undocumented) sector.  Because of these estimation errors, researchers, including India's former Chief Economic Adviser Arvind Subramanian, estimate that the absolute level of India's real GDP may be overstated by 22% to 31%. This implies the average citizen's actual standard of living is lower than official data suggests. 

Comments

Post a Comment

Popular posts from this blog

Digital Pakistan 2022: Broadband Penetration Soars to 90% of 15+ Population

Image
The year 2022 was a very rough year for Pakistan. The nation was hit by devastating floods that badly affected tens of millions of people. Macroeconomic indicators took a nose dive as political instability reached new heights. In the middle of such bad news, Pakistan saw installation of thousands of kilometers of new  fiber optic  cable, inauguration of a new high bandwidth  PEACE  submarine cable connecting Karachi with Africa and Europe, and millions of new broadband subscriptions. Broadband penetration among 140 million (59% of 236 million population) Pakistanis in  the15-64 years age group reached almost 90%. This new digital infrastructure helped grow technology adoption in the country.  Internet and Mobile Phone Banking Growth in 2021-22. Source: State Bank of Pakistan Fintech:  Mobile phone banking and internet banking grew by 141.1% to Rs. 11.9 trillion while Internet banking jumped 81.1% to reach Rs10.2 trillion.  E-commerce tra...
Read more

Pakistan Among World's Largest Food Producing Countries

Image
Pakistan's agriculture output is the 10th largest in the world. The country produces large and growing quantities of cereals, meat, milk, fruits and vegetables. Currently, Pakistan produces about 38 million tons of cereals (mainly wheat, rice and corn), 17 million tons of fruits and vegetables, 70 million tons of sugarcane, 60 million tons of milk and 4.5 million tons of meat.  Total value of the nation's agricultural output exceeds $50 billion.  Improving agriculture inputs and modernizing value chains can help the farm sector become much more productive to serve both domestic and export markets.   Top 10 Countries by Agriculture Output. Source: FAO Pakistan has about 36 million hectares of land under cultivation. Wheat and rice are grown on more than half of it. Fruits and vegetables each account for only about 3% of the cultivable land.  Since year 2001, the country's cereal production, mainly wheat, corn and rice, has grown about 45% to  38 million tons...
Read more

Is Pakistan's Social Sector Progress Hopeless?

Image
If you read Pakistan media headlines and donation-seeking NGOs and activists' reports these days, you'd conclude that the social sector situation is entirely hopeless. However, if you look at children's education and health trend lines based on data from credible international sources, you would feel a sense of optimism. This exercise gives new meaning to what former US President Bill Clinton has said: Follow the trend lines, not the headlines. Unlike the alarming headlines, the trend lines in Pakistan show rising school enrollment rates and declining infant mortality rates. Key Social Indicators: The quickest way to assess Pakistan's social sector progress is to look at two key indicators:  School enrollment rates and infant mortality. These basic social indicators capture the state of schooling, nutrition and health care. Pakistan is continuing to make slow but steady progress on both of these indicators. Anything that can be done to accelerate the pace will h...
Read more