Economic Analysis Presentation by Hammad

www.aiou.edu.pk M. HAMMAD MANZOOR, MBA HRM - I Roll No. 508195394, Karachi Campus

Department of Admin Sciences,

Allama Iqbal Open University, Islamabad

Presented By: M. Hammad ManzoorPresented By: M. Hammad Manzoor (MBA HRM I)(MBA HRM I)

Roll No. 508195394Roll No. 508195394

Supervised By: Mr. Tahir MasoodSupervised By: Mr. Tahir Masood ((November, 2011)November, 2011)

Types of Methods which are adopted by Types of Methods which are adopted by Government of Pakistan to Control Inflation Government of Pakistan to Control Inflation

& Unemployment& Unemployment

(Economic Analysis)(Economic Analysis)




WELCOMEWELCOME

TO THE PARTICIPANTSTO THE PARTICIPANTS



Allama Iqbal Open University, IslamabadAgenda Items for Presentation Agenda Items for Presentation

• Introduction about Author and Project• Introduction to the Topic• Practical Study – Islamic Republic of Pakistan• Data Collection Method / Analysis• SWOT analysis• Conclusions• Recommendations• Q & A Session




• Introduction about Author and Project“My Self”

• Introduction about Project“Types of Methods which are adopted by

Government of Pakistan to Control Inflation & Unemployment”

Philosophy of the project is,“How to understand the problem and find out a patent solution”

Introduction about Author and ProjectIntroduction about Author and Project




INTRODUCTIONINTRODUCTION




INFLATION

Inflation can be defined as a situation where there is a continuous increase in general price level over time Generally inflation is a situation where • there is too much money chasing too few goods

cost of living has increased • there is persistent fall in the value in the economy

prices are rising

Inflation




MEASURES OF INFLATION

Inflation is measured by calculating the percentage rate of change of a price index, which is called the inflation rate.

• CONSUMER PRICE INDICES (CPIS) which measure the price of a selection of goods and services purchased by a "typical consumer."

• COST-OF-LIVING INDICES (COLI) are indices similar to the CPI which are often used to adjust fixed incomes and contractual incomes to maintain the real value of those incomes.

• PRODUCER PRICE INDICES (PPIS) which measure the prices received by producers. This differs from the CPI in that price subsidization, profits, and taxes may cause the amount received by the producer to differ from what the consumer paid.

Measures of Inflation




Degrees of Inflation




Causes of Inflation




Causes of InflationDemand Pull Inflation:

The basic cause of inflation comes from the demand side

• There is persistent increase in demand which could be due factors

such as • Increase in money supply (expansionary monetary policy) • Increase in government purchases (expansionary fiscal policy) • Increase in exports

• when demand is rising and cannot be met by a corresponding increase in supply , then the general price level will increase and inflation will occur the rightward shift in the AD curve from AD1 to AD2 will result in excess demand the effect is to push prices upwards from P1 to P2

Price

Output

AD1

AD2

AS

Q1 Q2

P2

P1




Causes of Inflation

Cost Push Inflation: ( supply push inflation ) the basic cause is the rising costs of production , such as

an increase in wage rates an increase in the prices of raw materials

when industries are faced with rising production costs , they will push prices up in terms of AD-AS diagram , this is depicted as an upward shift in the AS curve from AS1 to AS 2

the result is a rise in prices from P1 to P2 Price

Output

AS1

AS2

P2

P1

Q2 Q1




Causes of InflationImported Inflation: If there is inflation in the source countries of imports, imported inflation comes in along with the imported goods and services.

E.g. as inputs or raw materials such as crude oil are purchased at high, inflated prices from the Middle East where the inflation originates, non-oil producers like Singapore import the inflation as well.




Unemployment

Unemployment: •The unemployed are those individuals who do not currently have a job but who are looking for work

•Individuals who looked for work in the past but are not looking currently are not counted as unemployed

•The employed are individuals who currently have jobsthus, employed + unemployed = labour force

•People who are not working and are not looking for work are not considered to be in the labour force such as a full-time student, homemaker, or retiree is not in the labour force

•Discouraged workers also not included in the official count of the unemployed as they are workers who left the labour force because they could not find jobs




Measurement of Unemployment

Measurement of Unemployment Unemployment rate The percentage of the labour force that is unemployed It is computed as:

OR

No. of unemployed workers

labour forceX100%

Labour force - no. of employed workers

labour forceX100%



Allama Iqbal Open University, IslamabadPRACTICAL STUDY – Islamic Republic of Pakistan

Islamic Republic of PakistanIslamic Republic of Pakistan The Islamic republic of Pakistan emerged as an independent sovereign state on 14th August 1947, as a result of the division of former British India. It lies between 23-35 to 37- 05 north latitude and 60-50 to 77- 50 east longitude touching the Hindukush Mountains in the north and extending from the Pamirs to the Arabian Sea.

Pakistan covers 796,095 sq.km with a population of 132.35 million according to population census 1998. It is divided into four provinces: Sindh, Punjab Khyber Pakhtun Khwa Balochistan

Climatically, Pakistan enjoys a considerable measure of variety. North and north western high mountainous ranges are extremely cold in winter while the summer months of April to September are very pleasant.




Administrative DivisionsAdministrative Divisions




Pakistan has a semi-industrialized economy. The growth poles of the Pakistani economy are situated along the Indus River. Diversified economies of Karachi and Punjab's urban centres, coexist with lesser developed areas in other parts of the country. Despite being a very poor country in 1947, Pakistan's economic growth rate has been better than the global average during the subsequent four decades, but imprudent policies led to a slowdown in the late 1990s.

Recently, wide-ranging economic reforms have resulted in a stronger economic outlook and accelerated growth especially in the manufacturing and financial services sectors. Since the 1990s, there has been great improvement in the foreign exchange position and rapid growth in hard currency reserves.

The 2005 estimate of foreign debt was close to US$40 billion. However, this has decreased in recent years with assistance from the International Monetary Fund and significant debt-relief from the United States. Pakistan's gross domestic product, as measured by purchasing power parity, is estimated to be $475.4 billion while its per capita income stands at $2,942. The poverty rate in Pakistan is estimated to be between 23% and 28%.

GDP growth was steady during the mid-2000s at a rate of 7%; however, slowed down during the Economic crisis of 2008 to 4.7%. A large inflation rate of 24.4% and a low savings rate, and other economic factors, continue to make it difficult to sustain a high growth rate. Pakistan's GDP is US$167 billions, which makes it the 48th-largest economy in the world or 27th largest by purchasing power adjusted exchange rates. Today, Pakistan is regarded as to having the second largest economy in South Asia.

Economy of Pakistan



Allama Iqbal Open University, IslamabadEconomy of Pakistan




ECONOMY, INFLATION & UNEMPLYMENT OF PAKISTAN –CHALLENGES AND PROSPECTS

• We Consume More and Save Less• We Import More and Export Less. • Government Spends More than it Earns as Revenues• Our Share in the World Trade is Shrinking• We Badly Lag in Social Indicators• We Face Energy and Water Shortages• Cost of Doing Business is High• Crisis of Governance and Implementation Weaknesses• Uncertainty and Unpredictability due to Lack of Continuity• Political Stability, Law and Order/Security




Methods or steps used by Government of Pakistan to control Inflation and Un-employment

There are three Main ways by which inflation can be controlled. Adopt tight monetary policy undertaken by Central Bank (State Bank of Pakistan) that use some instruments to influence the economy by reducing money supply and higher interest rates. Contractionary fiscal policy that deals with reducing government expenditures and increasing tax. Direct control - direct govt intervention in the price mechanism of the country



Allama Iqbal Open University, Islamabad•Price Pegging •Government fixed the floor and ceiling prices , so that prices will not increase rapidly •Producers will not be able to increase prices according to their own wishes

Control Of Trade Union •Demand for higher wages has caused cost-push inflation •Persuade not to make these demands

Anti-Hoarding Campaign •Done in Malaysia , where reports were made against producers and consumers who store their goods unnecessarily because such storage could cause artificial shortage and push prices up Price Tagging •Prices of all goods have to be labelled •Prevent producers from over-charging the consumers

Rationing •This is done as a last resort whereby consumers are given coupons to buy goods in certain quantities, for example, one family is only allowed to buy 10 kilograms of rice per month. In other words, the demand for the good is predetermined.




Policies to reduce unemployment depend on the type of unemployment

Frictional Unemployment •Focus primarily on improving the information flows between employers and job-seekers.•Employment agencies need to be set up to pool and provide information on the type of job opportunities that are available on the kind of workers who are searching for employment. •Another much more controversial remedy is for the government to reduce the level of unemployment benefit.

Structural Unemployment •Encouraging people to look more actively for jobs, if necessary in other parts of the country •Encourage people to adopt a more willing attitude towards retraining, and if necessary to accept some reduction in wages •Use wage subsidy programs to encourage employers to hire and train those who otherwise lack the necessary skills to get the jobs

Cyclical Unemployment •adopt expansionary monetary policies by increasing money supply and reducing interest rates to stimulate aggregate demand or expansionary fiscal policy by increasing government expenditure and reducing tax




• Pakistan holds strong Agriculture due to sufficient production of Sugar Cane, Wheat and Rice.• Pakistan holds rich mineral resources i.e. Gold & Copper mines in Baluchistan.• Pakistan holds good Hydrocarbon Potential in the form of Oil & Gas. i.e. Sui Gas Field, Kandhkot Gas Field.• Pakistan holds sound background in Sports kit Export. • Pakistan holds good ability for manufacturing of manufacture hard porcelain.• Pakistan holds Karachi port for import and export.

Strengths / Merits




Opportunities:•Huge growing domestic market•Growing purchasing power of people within the economy•Hydrocarbon Exploration emphasis could lead as good opportunity•Strong HRD and Job Resources•Simple lifestyles are growing.

Threats:•Weak International relations with the other countries•Strong economy of India•Increasing energy costs.(Oil & Electricity)•Increasing prices of basic necessities of Life•Political stability is at a decline.



Allama Iqbal Open University, Islamabad• • Development of Land Resources• Development of Agriculture finance resources• Plant Protection Measures• Change in National Psyche and Mindset• Young Labour Force• Governance, Devolution and Decentralization• Eradication of Corruption • Improvement of Export Policy• Development of Relationship with China & USA• Development of Infrastructure for oil and gas distribution• Privatization of Pak Railway• Collection of Taxes• Improvement of Power Generation Sources• New Dams Development• Invitation to Multinational Companies• Drilling of new exploratory wells • Security Threats tackling• Dialogues with Extremist Groups• Utilization of Mineral resources

Conclusions & Recommendations




Thanks for your patience ,,,,,,

Q & A Session

Economic Analysis Presentation by Hammad

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