The economic survey released highlights important insights regarding the investment-to-GDP ratio and its implications for the overall economic performance.
The decrease in the investment-to-GDP ratio from 15.6% in the previous fiscal year to 13.6% in 2022-23 raises concerns about the level of investment activity in the region.
The decline can be attributed to various factors, including a slowdown in both global and domestic economic activities, as well as contractionary macroeconomic policies implemented during the period.
The decline in per capita income from $1,765 to $1,568 further emphasizes the challenges faced by the economy.
The significant depreciation of the local currency and a contraction in economic activity contributed to this deceleration. Lower per capita income has implications for the overall standard of living and purchasing power of individuals.
Despite these challenges, the survey presents some positive developments. The trade balance showed improvement in 2022-23, indicating a positive trend in the country’s export and import dynamics.
Additionally, national savings increased, which is a crucial factor for supporting long-term economic growth and investment.
The estimate of Gross Fixed Capital Formation (GFCF) at Rs10 trillion reflects an increase of 8.1% compared to the previous fiscal year.
The sector-wise analysis of GFCF reveals substantial growth rates in public administration and social security, education, and human health and social work. These sectors play a critical role in the overall development of the economy and the well-being of the population.
The concept of the incremental capital output ratio (ICOR) sheds light on the efficiency of investment in generating additional units of GDP.
?The trend of the inverse ICOR suggests that despite achieving high GDP growth rates, the incremental increase in investment is not commensurate with the desired level required to drive further economic expansion. This finding underscores the need for targeted policies and measures to enhance investment efficiency and promote sustainable economic growth.