NAME:

ARIF USMAN
STUDENT ID. :
16020
PROGRAM:
MBA (MHM)
SUBJECT:
MICRO AND MACRO ECONOMICS
INSTRUCTOR:

NEWS # 1: Manufacturing share in

GDP slips
ISLAMABAD: The share of manufacturing in GDP has witnessed a slight decline
in the last five years. This was stated by Federal Minister for Industries Ghulam
Murtaza Khan Jatoi in a written reply to a question of Senator Mrs Nuzhat Sadiq.
The minister said that his government is combating the ongoing energy crisis through
allocating more resources for energy supply; imparting expertise through volunteer
experts from abroad. The share of manufacturing sector in GDP was 13.8 per cent in
2009 which fell to 13.2pc in the year 2013.
Jatoi said the share of manufacturing in GDP in China and Bangladesh has remained
constant, while in Pakistan and India there has been a slight decrease. However, he
admitted that no specific study in manufacturing sector has been carried out in the
recent past.

NEWS # 2: Pakistan Steel paid two

months salary
KARACHI: Pakistan Steel Mills (PSM) has given salaries of two months (February
and March) to all its employees after release of Rs4.2 billion from the Ministry of
Finance.
Around Rs960 million was spent in clearing two-month salaries of 15,600 employees.
The Rs4.2bn is the first tranche of the restructuring package of Rs18.5bn approved by
the government.
Two letters of credit (LCs) to procure coking coal each of 55,000 metric tons amounting
to Rs1.5bn have also been opened from this amount. The coal would be imported from
Australia.

The remaining amount will be utilised to pay utility bills, capital repairs and to disburse
payment to suppliers. Spokesman for the PSM, Shazim Akhtar, said the mills
management hoped that production would improve after the release of the first tranche.
The Steel Mills is facing a deficit of Rs115bn and currently production hovers around
three to five per cent.

NEWS # 3 : Tax-to-GDP ratio down

ISLAMABAD: The budget strategy paper for 2014-17 presented to the federal
cabinet by Finance Minister Ishaq Dar sets ambitious targets for reduction of debt
build-up and fiscal deficit, but concedes that the tax-to-GDP ratio has declined
during the current year despite an increase in tax rates.
According to sources, the minister informed the cabinet on Thursday that even though
tax collection had improved by more than 15 per cent during this year, the tax-to-GDP
ratio had dropped significantly.
The government had set a target to achieve the ratio of 10.9pc this year, which has now
been brought down to 10.5pc on the basis of the collection in the first 10 months and
projected collection in the remaining six weeks.
This was despite the fact that the general sales tax on all products and services was
increased by 1pc by Mr Dar in his first budget speech and withholding tax was also
imposed on seven key sectors.
A number of measures for documentation of economy to broaden the tax base and
increase the tax-to-GDP ratio announced in the budget were gradually withdrawn over
the course of the fiscal year.
The strategy paper projected the ratio to grow to 11.3pc by the end of the next fiscal
year, followed by 12pc in 2015-16 and reaching up to 12.7pc in 2016-17.
The government has set a target of 5.5pc GDP growth in 2014-15 which will be
increased to 7pc and 7.2pc for the next two years.

It was reported that the GDP growth rate this year was estimated at 4.14pc against a
target of 4.4pc.
The document projected the public debt-to-GDP ratio at 60.2pc at the end of the current
fiscal year, lower than the 61.3pc budget target. The target is to reduce public debt to
56.7pc of GDP in 2014-15, 53.2pc in 2015-16 and 49.8pc in 2016-17.
The foreign exchange reserves were $13.9 billion on May 13 and will increase to $19bn
by the end of the next fiscal year, $22bn in 2015-16 and $22.5bn by 2016-17.
The budget paper put the current years investment-GDP ratio at 13.5pc and set a
target of 16.5pc for the next year, 20.2pc by 2015-16 and 21pc by 2016-17.
The cabinet was informed that the inflation rate was expected to settle down at 8.5pc
this year against a target of 8pc, but would remain stable at the same level during the
next three years. The government expects to achieve a consolidated fiscal deficit level
of 5.7pc of GDP this year against the budget target of 6.3pc. The figure will be brought
down to 4.8pc next year and stabilised at 4pc over the subsequent two fiscal years.

DEFINITIONS OF GDP, INFLATION AND

UNEMPLOYMENT:
1.

GDP:

The total market value of all final goods and services produced
in a country in a given year, equal to total consumer,
investment and government spending, plus the value of
exports, minus the value of imports.
The monetary value of all the finished goods and services
produced within a country's borders in a specific time period,
though GDP is usually calculated on an annual basis. It includes
all of private and public consumption, government outlays,
investments and exports less imports that occur within a
defined territory.
GDP = C + G + I + NX
where:

"C" is equal to all private consumption, or consumer spending,

in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on
capital
"NX" is the nation's total net exports, calculated as total
exports minus total imports. (NX = Exports - Imports)
GDP Reporting:
The GDP report is released at 8:30 am EST on the last day of
each quarter and reflects the previous quarter. Growth in GDP
is what matters, and the U.S. GDP growth has historically
averaged about 2.5-3% per year but with substantial
deviations. Each initial GDP report will be revised twice before
the final figure is settled upon: the "advance report" is followed
by the "preliminary report" about a month later and a final
report a month after that. Significant revisions to the advance
number can cause additional ripples through the markets.

2.

UNEMPLOYMENT:

Unemployment is defined as a situation where someone of

working age is not able to get a job but would like to be in full
time employment.
Note: If a Mother left work to bring up a child or if someone went
into higher education, they are not working but would not be
classed as unemployed as they are not actively seeking
employment.
One grey area is voluntary unemployment. This occurs when the
unemployed choose not to take a job, the going wage rate (e.g.

wrong job, benefits too high etc.) They could be counted as

unemployed because they are still seeking a job (they just dont
want to take one they are offered.
Measuring Unemployment:
Unemployment in the UK Is measured in two ways
1.

Claimant Count number of people eligible for Job Seekers

Allowance (note people may be viewed as unemployed but not
eligible for benefits)
2.
Labor Force Survey A survey asking people whether they
are out of work and actively seeking work.
Types of Unemployment
Unemployment Types

Demand Deficient Unemployment. Lack of AD in economy

(e.g. Recession)
Structural Unemployment workers lack necessary skills or
geographical immobility
Real Wage Unemployment wages above equilibrium
Frictional unemployment workers in between jobs
Voluntary Unemployment. workers prefer not to work
Demand Deficient Unemployment: Demand deficient
unemployment occurs in a recession or period of very low
growth. If there is insufficient Aggregate Demand, firms will
cut back on output.
Structural Unemployment: This is unemployment due to
inefficiencies in the labour market. It may occur due to a
mismatch of skills or geographical location.
Real Wage Unemployment / Classical Unemployment:
This occurs when wages are artificially kept above the
equilibrium. For example, powerful trades unions or
minimum wages could lead to wages above the equilibrium
leading to excess supply of labour (this assumes labour

markets are competitive) Keynesian analysis suggests a fall

in AD can lead to real wage unemployment as wages are
sticky downwards and a fall in AD doesnt lead to wages
clearing.
Frictional unemployment: This occurs when workers are
in between jobs e.g. school leavers take time to find work.
Voluntary Unemployment: This occurs when workers
choose not to take a job at the going wage rate.

3.

INFLATION:

The rate at which the general level of prices for goods and
services is rising, and, subsequently, purchasing power is
falling. Central banks attempt to stop severe inflation, along
with severe deflation, in an attempt to keep the excessive
growth of prices to a minimum.

Pakistan GDP:

The Gross Domestic Product (GDP) in Pakistan was worth 231

billion US dollars in 2012. The GDP value of Pakistan represents
0.37 percent of the world economy. GDP in Pakistan averaged
52.29 USD Billion from 1960 until 2012, reaching an all-time high
of 231 USD Billion in 2012 and a record low of 3.70 USD Billion in
1960. GDP in Pakistan is reported by the World Bank Group.

Actual Previous Highest Lowest Dates

1960 231.00 211.00 231.00 3.70
2012

Unit
USD Billion

Frequency
Yearly

The gross domestic product (GDP) measures of national income

and output for a given country's economy. The gross domestic
product (GDP) is equal to the total expenditures for all final goods
and services produced within the country in a stipulated period of
time. This page provides - Pakistan GDP - actual values, historical
data, forecast, chart, statistics, economic calendar and news.

 Pakistan GDP Growth Rate:

The Gross Domestic Product (GDP) in Pakistan expanded 3.59
percent in 2013 from the previous year. GDP Growth Rate in
Pakistan averaged 4.94 Percent from 1952 until 2013, reaching an
all time high of 10.22 Percent in 1954 and a record low of -1.80
Percent in 1952. GDP Growth Rate in Pakistan is reported by the
Pakistan Bureau of Statistics.

Actual Previous Highest Lowest Dates

Unit
Frequency
3.59
4.36
10.22 -1.80 1952 - 2013 Percent
Yearly
Pakistan is one of the poorest and least developed countries in
Asia. Pakistan has a growing semi-industrialized economy that
relies on manufacturing, agriculture and remittances. Although
since 2005 the GDP has been growing an average 5 percent a
year, it is not enough to keep up with fast population growth. To
make things even worst, political instability, widespread
corruption and lack of law enforcement hamper private
investment and foreign aid. This page provides - Pakistan GDP
Growth Rate - actual values, historical data, forecast, chart,
statistics, economic calendar and news.

 Pakistan Unemployment Rate:

Unemployment Rate in Pakistan decreased to 6 percent in the
second quarter of 2013 from 6.30 percent in the first quarter of
2013. Unemployment Rate in Pakistan averaged 5.43 Percent
from 1985 until 2013, reaching an all time high of 7.80 Percent in
the second quarter of 2002 and a record low of 3.10 Percent in
the fourth quarter of 1987. Unemployment Rate in Pakistan is
reported by the Pakistan Bureau of Statistics.

Actual Previous Highest Lowest Dates

Unit
Frequency
6.00
6.30
7.80
3.10 1985 - 2013 Percent Quarterly
In Pakistan, the unemployment rate measures the number of
people actively looking for a job as a percentage of the labour
force. This page provides - Pakistan Unemployment Rate - actual
values, historical data, forecast, chart, statistics, economic
calendar and news.

 Pakistan Inflation Rate:

The inflation rate in Pakistan was recorded at 9.18 percent in April
of 2014. Inflation Rate in Pakistan averaged 8.04 Percent from
1957 until 2014, reaching an all time high of 37.81 Percent in
December of 1973 and a record low of -10.32 Percent in February
of 1959. Inflation Rate in Pakistan is reported by the Pakistan
Bureau of Statistics.

Actua Previou Highes Lowes

Frequenc
Dates Unit
l
s
t
t
y
1957 - Percen
2007/2008=1
9.18 8.53 37.81 -10.32
Monthly
2014
t
00
In Pakistan, most important categories in the consumer price
index are food and non-alcoholic beverages (35 percent of total
weight); housing, water, electricity, gas and fuels (29 percent);

clothing and footwear (8 percent) and transport (7 percent). The

index also includes furnishings and household equipment (4
percent), education (4 percent), communication (3 percent) and
health (2 percent). The remaining 8 percent is composed by:
recreation and culture, restaurants and hotels, alcoholic
beverages and tobacco and other goods and services. This page
provides - Pakistan Inflation Rate - actual values, historical data,
forecast, chart, statistics, economic calendar and news.
REFERENCES:

http://www.tradingeconomics.com/pakistan/infl
ation-cpi
http://www.indexmundi.com/pakistan/unemploy
ment_rate.html
http://www.indexmundi.com/pakistan/gdp_real_
growth_rate.html