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

Pakistan’s average productivity growth remained just 1.5 per cent from 2010 to 2020, significantly low to achieve the required GDP growth rate of around 7-8pc on a sustainable basis, a new study shows. 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. The study used unique listed and non-listed data from 1,321 firms divided into 61 sectors to estimate productivity growth in the country. Its results show that high-productivity growth sectors are mostly based on services or tech, whereas those with medium to low or negative productivity growth are in manufacturing. Total factor productivity (TFP) growth is a crucial determinant of long-term output growth. Countries that manage to boost their TFP growth grow at a much higher rate and for a sustained period. On the other hand, countries growing without a significant contribution from the TFP growth experience difficulty in maintaining a sustainable growth trajectory.