Goldman Sachs Projects Pakistan Economy to Become the World's 6th Largest by 2075

Goldman Sachs analysts Kevin Daly and  Tadas Gedminas project Pakistan's economy to grow to become the world's sixth largest by 2075.  In a research paper titled "The Path to 2075", the authors forecast Pakistan's GDP to rise to $12.7 trillion with per capita income of $27,100.  India’s GDP in 2075 is projected at $52.5 trillion and per capita GDP at $31,300.  Bangladesh is projected to be a $6.3 trillion economy with per capita income of $31,000.  By 2075, China will be the top global economy, followed by India 2nd, US 3rd, Indonesia 4th, Nigeria 5th and Pakistan 6th. The forecast is based primarily on changes in the size of working age populations over the next 50 years.  

GDP Ranking Changes Till 2075. Source: Goldman Sachs Investment Res... 

 

Economic Growth Rate Till 2075. Source: Goldman Sachs Investment Re... 

Economic Impact of Slower Population Growth: 

Daly and Gedminas argue that slowing population growth in the developed world is causing their economic growth to decelerate. At the same time, the economies of the developing countries are driven by their rising populations.  Here are four key points made in the report:

 1) Slower global potential growth, led by weaker population growth. 

2) EM convergence remains intact, led by Asia’s powerhouses. Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth.

3) A decade of US exceptionalism that is unlikely to be repeated. 

4) Less global inequality, more local inequality. 

Goldman Sachs' Revised GDP Projections. Source: The Path to 2075

Demographic Dividend: 

With rapidly aging populations and declining number of working age people in North America, Europe and East Asia, the demand for workers will increasingly be met by major labor exporting nations like Bangladesh, China, India, Mexico, Pakistan, Russia and Vietnam. Among these nations, Pakistan is the only major labor exporting country where the working age population is still rising faster than the birth rate. 

Pakistan Population Youngest Among Major Asian Nations. Source: Nik...

World Population 2022. Source: Visual Capitalist

World Population 2050. Source: Visual Capitalist

Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020,  more than 600,000 Pakistanis left the country to work overseas in 2019. Nearly 700,000 Pakistanis have already migrated in this calendar year as of October, 2022. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East was over half a million in the last decade. 

Consumer Markets in 2030. Source: WEF

World's 7th Largest Consumer Market:

Pakistan's share of the working age population (15-64 years) is growing as the country's birth rate declines, a phenomenon called demographic dividend. With its rising population of this working age group, Pakistan is projected by the World Economic Forum to become the world's 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7  by 2030. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico.  Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan.  Already, the year 2021 has been a banner year for investments in Pakistani technology startups

Record Remittances From Overseas Pakistanis:
 
Pakistan is already seeing high levels of labor export and record remittances of over $30 billion pouring into the country. Saudi Arabia and the United Arab Emirates(UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States.
 
Remittances from the European Union (EU) to Pakistan soared 49.7% in FY 21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, second fastest after the EU (28.3%) in the first 9  months of the current fiscal year. 
 
Pakistan ranks 6th among the top worker remittance recipient countries in the world.  India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.  
 
Pakistan Demographics
About two million Pakistanis are entering the workforce every year. The share of the working age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as demographic dividend, is coinciding with declines in working age populations in developed countries. It is creating an opportunity for over half a million Pakistani workers to migrate and work overseas, and send home record remittances. 

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Comment by Riaz Haq on January 14, 2023 at 8:52am

Pakistan: Five major issues to watch in 2023
Madiha Afzal

https://www.brookings.edu/blog/order-from-chaos/2023/01/13/pakistan...

1. POLITICAL INSTABILITY, POLARIZATION, AND AN ELECTION YEAR
Politics will likely consume much of Pakistan’s time and attention in 2023, as it did in 2022. The country’s turn to political instability last spring did not end with a dramatic no-confidence vote in parliament last April that ousted then Pakistani Prime Minister Imran Khan from office. Instability and polarization have only heightened since then: Khan has led a popular opposition movement against the incumbent coalition government and the military, staging a series of large rallies across the country through the year.

2. A PRECARIOUS ECONOMIC SITUATION
Pakistan’s economy has been in crisis for months, predating the summer’s catastrophic floods. Inflation is backbreaking, the rupee’s value has fallen sharply, and its foreign reserves have now dropped to the precariously low level of $4.3 billion, enough to cover only one month’s worth of imports, raising the possibility of default.

3. FLOOD RECOVERY
A “monsoon on steroids” – directly linked to climate change – caused a summer of flooding in Pakistan so catastrophic that it has repeatedly been described as biblical. It left a third of the country under water – submerging entire villages – killed more than 1,700, destroyed homes, infrastructure, and vast cropland, and left millions displaced.

4. MOUNTING INSECURITY
The Pakistani Taliban (or TTP), the terrorist group responsible for killing tens of thousands of Pakistanis from 2007 to 2014, have been emboldened – predictably so – by a Taliban-ruled Afghanistan, and once again pose a threat to Pakistan, albeit in a geographically limited region (for now). The group engaged in at least 150 attacks in Pakistan last year, mostly in the northwest. Because the TTP have sanctuary in Afghanistan, the Pakistani state increasingly finds itself out of options when it comes to dealing effectively with the group. The state’s negotiations with the TTP have failed repeatedly, as they are bound to, because the group is fundamentally opposed to the notion of the Pakistani state and constitution as it exists today. The Afghan Taliban have, unsurprisingly, also not proved to be of help in dealing with the TTP – and Pakistan’s relations with the Afghan Taliban have deteriorated significantly at the same time over other issues, including the border dividing the two countries.

5. CIVIL-MILITARY RELATIONS
Pakistan has a new chief of army staff as of November 29 last year. General Asim Munir replaced General Qamar Javed Bajwa, who had held the all-powerful post for six years (due to a three-year extension). The appointment of the army chief was a subject of considerable political contention last year; a major part of the reason Khan was ousted from power was his falling out with the military on questions over the appointments of top army officials.

Comment by Riaz Haq on January 16, 2023 at 4:25pm

Pakistan’s productivity growth averaged 1.5pc in 2010s: study

https://www.dawn.com/news/1731884

The study — titled Sectoral Total Factor Productivity in Pakistan and conducted by the planning ministry and the think tank Pakistan Institute of Development Economics (PIDE) — says that the growth of productivity is a crucial determinant of an economy’s growth that has to be pushed higher to over 3pc.

https://pide.org.pk/wp-content/uploads/rr-057-sectoral-total-factor...

---------

Significantly low to achieve required GDP growth of 7-8pc
• High-productivity growth sectors mostly based on services or technology

---------

The services sector could also be more productive because of digitisation. Similarly, flexibility in technology adoption could be another factor. It is often observed that Pakistani firms in the manufacturing sector are primarily family-owned and managed, and are in general averse to modern management practices, a factor that inhibits productivity growth, the study says.

---------------

Dividing the 61 sectors into three categories — i.e., high TFP growth (above 3pc), medium to low TFP growth (between 0pc and 2.9pc), and negative TFP growth (below 0pc) — the study found that most sectors with high TFP growth are either related to services or tech.

Most sectors in the medium to low TFP growth category are in manufacturing. Two export-designated sectors, i.e. sports goods and textile composite, also feature in medium to low-growth sectors.

Most negative growth sectors are also in the manufacturing category, which captures three export-designated sectors (textile spinning, textile weaving, and leather and tanneries) amongst other salient industries such as fertiliser and automobiles.

The analysis also precipitates a trend between sectors that receive subsidies and medium to low TFP growth or negative TFP growth categories. Similarly, the export share of each of these sectors, barring the textile sector, in global exports is less than 1pc in their respective category.

According to the analysis, services have higher TFP growth on average than manufacturing. One plausible reason for this could be greater competition in services. Besides, the manufacturing sector is protected in Pakistan, which insulates them from the competition by retarding any incentive to improve efficiency.

The services sector could also be more productive because of digitisation. Similarly, flexibility in technology adoption could be another factor. It is often observed that Pakistani firms in the manufacturing sector are primarily family-owned and managed, and are in general averse to modern management practices, a factor that inhibits productivity growth, the study says.

Comment by Riaz Haq on January 16, 2023 at 6:14pm

Average years of schooling for 15+ population in Pakistan is expected to grow from 6 years in 2020 to 8.4 years in 2050.

Average years of schooling for 15+ population in India is expected to grow from 6.6 years in 2020 to 8.9 years in 2050.


https://www.tilasto.com/en/topic/education-and-science/average-year...

Comment by Riaz Haq on January 17, 2023 at 8:13am

Pakistan remains a lower-middle income country and will continue to be vulnerable to fluctuating energy prices, warns a UN report released on Monday.

https://www.dawn.com/news/1732029

https://www.ilo.org/wcmsp5/groups/public/@dgreports/@inst/documents...

The report also places India and Bangladesh among lower-middle-income countries despite their economic gains and urges the entire South Asian region to reduce its energy consumption. Nepal is also placed in the same category, although Afghanistan is listed among low-income countries.

The report by the UN labour agency warns that finding a decent and well-paid job will be harder in 2023 than it was in 2022, thanks to the continuing global economic downturn.

The report notes that South Asia has not been affected by the Ukraine war as it has few direct links with Russia and Ukraine. But it is “very vulnerable to the higher global commodity prices that have resulted from the conflict.”

According to this report, South Asia “remains highly vulnerable to natural disasters, for example on the flood plains of Pakistan and Bangladesh.” Countries such as Pakistan “are also increasingly held back by very high levels of energy subsidies, which weigh heavily on public finances and are failing to reduce poverty effectively.”

The report argues that recent high and volatile energy prices have shown South Asia’s vulnerability to energy imports, and underlines “a clear need to become less dependent on these imports.”

The UN labour agency predicts that the number of people unemployed around the world would rise slightly to 208 million in 2023. This corresponds to a global unemployment rate of 5.8 per cent — or 16 million people — according to the International Labour Organisation’s (ILO) World Employment and Social Outlook Trends report. Today’s economic slowdown “means that many workers will have to accept lower quality jobs, often at very low pay, sometimes with insufficient hours,” the report adds.

The UN agency notes that this already happening in Europe and other developed countries, thanks to the Ukraine war and the continued disruption of global supply chains, both of which are counteracting the robust stimulus packages implemented to ride out the Covid-19 crisis. “Real wages we project for 2022 to have declined by 2.2pc in advanced countries and of course, Europe makes up a significant proportion of advanced countries, versus a rise in real wages in developing countries,” says Richard Samans, Director of ILO’s Research Department. The report also predicts a setback to the informal economy, which will adversely affect efforts to help the world’s two billion informal workers join the formal employment sector.

As prices rise faster than wages, the cost-of-living crisis risks pushing more people into poverty, the report adds, pointing out that the trend follows significant declines in income during the Covid-19 crisis, which affected low-income groups most, in many countries. Some 214m workers live in extreme poverty today, “in other words with $1.90 a day.

From a gender perspective, the unequal development of the global jobs market continues to be concerning. There are 290 million youth who are not in employment, or in education or training and “young women are faring much worse,” the report warns.

Comment by Riaz Haq on January 17, 2023 at 8:22am

World
Employment
and Social Outlook
Trends
2023

https://www.ilo.org/wcmsp5/groups/public/@dgreports/@inst/documents...

South Asia has seen the strongest growth in
the region and some of the highest regional
figures in the world: 6.0 per cent in 2022 and
5.3 per cent projected for 2023 (IMF 2022b).
Exports of services from the subregion are increasing and are expected to have contributed
positively to growth in 2022 and to do so again
in 2023 (World Bank 2022g). The digital services
sector has performed particularly strongly,
whereas sectors like tourism and construction
have not recovered to pre-pandemic levels in most
of the subregion (World Bank 2022h). Originally
high growth projections for India have been revised downwards and may be so revised further,
given deteriorating global conditions and faster
than anticipated monetary tightening (IMF 2022d).
Household consumption will be held back by slow
recovery of the labour market and by high inflation
(World Bank 2022g).

-------

At the global level, the picture is a bit more nuanced. Global labour productivity growth accelerated from 1990 until the onset of the GFEC in 2009.
This development reflected strong productivity
growth in several emerging market economies,
which more than offset the slowdown in the G7
and Organisation for Economic Co-operation and
Development (OECD) countries. Nevertheless,
even these EMDEs that enjoyed higher labour
productivity growth rates in the past are now also
subject to stagnating or even slowing productivity
growth. This stagnation began shortly after the
GFEC, as illustrated by the experiences of China
and India. Although China’s labour productivity
growth used to be significantly higher than that
of the G7 countries, it has sharply slowed down in
recent times and has done so even faster than in
the latter countries. Furthermore, the significant
increase in productivity growth between 1990
and 2010 did not occur in all EMDEs. For example,
Brazil has followed a downward path similar to that
of advanced economies, with only a temporary
upswing around the GFEC. Labour productivity
growth in EMDEs has also been more volatile and
heterogeneous since the 1980s than in advanced
economies, where the decline has been relatively
homogeneous (Dieppe 2021).

------

As can be seen in figures 3.2 and 3.3, the slowdown
in labour productivity growth became ubiquitous in
the past decade and is by now afflicting the entire
globe. One reason for this might be that the stagnation in advanced economies exerts a negative
effect on the productivity outlook in less developed
economies, especially at a time when the latter are
running out of policy space as a consequence of
international fiscal and monetary shocks.

Comment by Riaz Haq on Monday

During the year 2022 (December), 832,339 Pakistanis proceeded abroad for the purpose of employment.

https://beoe.gov.pk/?__cf_chl_jschl_tk__=b1b4890b1c9705af3b244646c1...

Since inception of the Bureau in the year 1971, more than 10 million emigrants have been provided overseas employment duly registered with the Bureau of Emigration & Overseas Employment. During the year 2015, highest number of Pakistanis(946,571) proceeded abroad for the purpose of employment. During the year 2022 (December), 832,339 Pakistanis proceeded abroad for the purpose of employment.

Comment by Riaz Haq on Monday

#India's #Internet Growth is Stalling! #Mobile internet subscriber growth has slipped to single digits from scorching double digits between 2016 and 2020. Sale of #mobilephones fell to 151 million units last year, down from a peak of 168 million in 2021. https://www.bbc.com/news/world-asia-india-64293857

By Soutik Biswas

With more than a billion users, India boasts the world's second largest mobile phone market.

Yet, internet growth in this vast market appears to have stalled.

In October 2022, the country's telecom regulator counted 790 million wireless broadband subscribers, people who access the internet on mobile phones. That was barely a million more subscribers than what it recorded in August 2021. Growth in mobile internet subscribers has now slipped to single digits from scorching double digits between 2016 and 2020.

Smartphones are the main gateway to go online - and this is where growth is flattening. India currently has some 650 million smartphone users but the pace of growth has slowed. Sale of mobile phones fell to 151 million units last year, down from a peak of 168 million in 2021, according to Counterpoint, a market research firm. A single-digit growth in sales is predicted this year.

Up until three years ago, users were buying a new smartphone every 14-16 months, according to IDC, another market research firm. But now they are looking for an upgrade every 22 months or so.

One reason is that smartphone prices have gone up since the pandemic because of rising component costs, a weakening rupee and supply chain disruptions involving China, the world's largest smartphone maker. Nearly 90% of the more than 300 components in India-made smartphones are imported.

At home, a slowing economy, loss of jobs and a resultant squeeze on incomes means less money in the wallet for a pricier new phone. "The slowdown in internet growth should be seen as an indicator of the state of the economy," says Nikhil Pahwa, a digital rights campaigner.

The average price of a smartphone is now around 22,000 rupees ($269; £220), up from 15,000 rupees two years ago, according to Navkendar Singh of IDC. For a market of its size, India is remarkably price sensitive: 80% of the devices sold here cost less than 20,000 rupees. "This is a real cause of concern. The world's second largest mobile phone market has a smartphone penetration which is nowhere close to China, which has the largest market," says Mr Singh.

Some like Anuj Gandhi, founder of Plug and Play Entertainment, wonder whether India's smartphone market has hit the buffers. "Where will more growth come from when there are so many people still living in poverty?" he says.

India has more than 350 million users of "dumbphones" - basic handsets, or feature phones - who can potentially move to smartphones if they can afford it. Almost half of these people use devices that cost less than 1,500 rupees.

Stung by higher prices of devices and data, only 35 million Indians upgraded from feature to smartphones in 2022, compared to 60 million every year before Covid struck, according to Tarun Pathak of Counterpoint. "The feature to smart phone migration has slowed down considerably," he says.

What is not always accounted for is a thriving and informal second-hand [refurbished phones] market that could be fulfilling the need for "cheap" smartphones. "The second-hand market is meeting some of this demand. But we are not really growing the base," says Mr Singh.
----

A slowdown in internet growth isn't good news for India. Without a smartphone, it becomes difficult for many to access government welfare benefits, rations and vaccines, among other things. More than 250 million transactions are being made every day this month alone on the Unified Payments Interface (UPI), a government-backed real-time cashless transaction platform using mobile applications. India's central bank talks about a "less-cash, less-card society" by 2025.

Comment by Riaz Haq on Tuesday

#Japan's #demographic crisis. More retirees, fewer workers. Japan has one of the lowest #birth rates in the world, with the Ministry of #Health predicting it will record fewer than 800,000 births in 2022 for the first time since records began in 1899. https://www.cnn.com/2023/01/23/asia/japan-kishida-birth-rate-popula...


Japan’s prime minister issued a dire warning about the country’s population crisis on Monday, saying it was “on the brink of not being able to maintain social functions” due to the falling birth rate.

In a policy address to lawmakers, Fumio Kishida said it was a case of solving the issue “now or never,” and that it “simply cannot wait any longer.”

“In thinking of the sustainability and inclusiveness of our nation’s economy and society, we place child-rearing support as our most important policy,” the prime minister said.

Kishida added that he wants the government to double its spending on child-related programs, and that a new government agency would be set up in April to focus on the issue.

Japan has one of the lowest birth rates in the world, with the Ministry of Health predicting it will record fewer than 800,000 births in 2022 for the first time since records began in 1899.

The country also has one of the highest life expectancies in the world; in 2020, nearly one in 1,500 people in Japan were age 100 or older, according to government data.

These trends have driven a growing demographic crisis, with a rapidly aging society, a shrinking workforce and not enough young people to fill the gaps in the stagnating economy.

Experts point to several factors behind the low birth rate. The country’s high cost of living, limited space and lack of child care support in cities make it difficult to raise children, meaning fewer couples are having kids. Urban couples are also often far from extended family who could help provide support.

Attitudes toward marriage and starting families have also shifted in recent years, with more couples putting off both during the pandemic.

Some point to the pessimism young people in Japan hold toward the future, many frustrated with work pressure and economic stagnation.

Japan’s economy has stalled since its asset bubble burst in the early 1990s. The country’s GDP growth slowed from 4.9% in 1990 to 0.3% in 2019, according to the World Bank. Meanwhile, the average real annual household income declined from 6.59 million yen ($50,600) in 1995 to 5.64 million yen ($43,300) in 2020, according to 2021 data from the country’s Ministry of Health, Labor and Welfare.

The government has launched various initiatives to address the population decline over the past few decades, including new policies to enhance child care services and improve housing facilities for families with children. Some rural towns have even begun paying couples who live there to have children.

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