Assuming Pak’s current GDP is $120 bn (EIU, SPB, IMF data *roughly) if between now and 2020 it had a ave annual growth rate of 5% what would the GDP be in 2020.
How do you work this out. Please show me the formula.
Also, what if it were 6% ave.
Thanks.
Re: Economic growth question
Another question I would like answered is if Pakistan contiues to grow at an average rate of 6.5 percent, for the next 10 years, how will its economy compare to other economies in the region?
Re: Economic growth question
I believe that Pakistan current GDP (for the year 2005-2006) is 135 to 140 billion dollars (and per capita income is around 847 dollars).
Regardless, the figures you gave are incomplete to work out the figure you asked for year 2020 (14 years from now).
Thus to calculate it, I will assume my own figures while keeping your real average annual growth rate of 5 percent.
Let say Pakistan average inflation rate for next 14 years is 7 percent and exchange rate stays same, that is Rs 60 to a dollar in 2020.
Thus, using above figures, Pakistan nominal GDP growth would be
Multiply 1.07 by 1.05 = 1.1235. That is 12.35 percent nominal growth a year in rupees.
Now if average growth and average inflation for next 14 years stays same then economy would grow on average by 12.35 percent every year.
Thus, overall nominal growth of 14 years would be 1.1235 to the power of 14 = 5.105
Present GDP (according to you is) 120 billion dollars. Taking exchange rate as Rs 60 to a dollar then 120 billion dollars would be: 120 billion multiply by 60 = 7200 billion rupees
(Pakistan GDP is work out in Pakistani Rupees that is converted to dollars depending on the average exchange rate over the financial year).
After 14 years (by June 2020), this GDP in rupees would be 7200 multiply by 5.105 = 36756 billion rupees.
At Rs 60 to one dollar, that GDP would be Rs 36756 billions divided by 60 = 612 billion dollars (GDP for year 2020).
[At average real growth rate of 6 percent (with all other figures samw), GDP in 2020 would be around 700 billion dollars.
At 6.5 percent real growth rate, GDP in 2020 would be 747 billion dollars].
For per capita income, one has to have population growth rate too. At present, it is around 1.9 percent. Suppose if that stays constant then Pakistan Population would grow in 14 years by:
1.019 to the power of 14 = 1.30148 or 30.15 percent. (Present population is 160 millions thus population would be 208 millions by 2020).
So, dividing 612 billion by 208 million, we would have per capita income (in nominal dollar) of 2942 dollars.
Now as you can see, to get true figure in nominal dollars, along with average real growth rate, we need average inflation rate and exchange rate in 2020 (the year you are looking for).
[Just for interest, at present, real per capita income of USA is around 10 times of Pakistan, though nominal per capita income of USA is around 50 times more then Pakistan. That means real purchasing power of one dollar in USA is similar to real purchasing power of around 6 rupees in Pakistan (that is average).
That means, if Pakistan real growth stays at 8 percent continuously and USA real growth stays at 3 percent continuously while population growth stays same in both countries continuously, than after 50 years, both country would have similar per capita income. (Though I think that at real 8 percent growth, it would need Pakistan around 65 to 70 years to get to that level).
Well, when corrupt politicians and bureaucracy are lurking behind the screen all the time for chance to plunder Pakistan, it seems a wishful thought that may never materialize. Over the last 3 years, Pakistan average real growth was around 7 to 7.5 percent]
Re: Economic growth question
Wow that seems complex.
I was hoping it would be simply by takeing current GDP, given a growth rate (5% ave) and working out the figure for 2020. Ie year 1 (2006) gdp is 120, year 2 = 126 then 5% of 126 ect thru to 2020.
Is there a formulae for that.
GDP 700bn USD by 2020 seems too high. Thats like 5-6 times out current economy.
Re: Economic growth question
hmm … I dont think that its that complicated 
Well, please tell me what did you found complicated?
Actually, you are right in an ideal condition where inflation is zero and exchange rate is fixed.
Than, if average growth rate is 5 percent then as you said
After Year 1 GDP = 120 billion dollars multiplied by 1.05 = 126 billion dollars
After year 2 GDP = 126 billion dollars multiplied by 1.05 = 132 billion dollars
After 14 years, that would be 120 billion dollars multiplied by [1.05 to the power of 14] = 237.6 billion dollars ← that is the formulae
In the above formulae, change 14 by number of years you want and change 5 to any number you want for the growth. If growth is 10 then 1.05 would be 1.10
Re: Economic growth question
How would I input that into a calculator.
120 * (1.05*14) = ???
Is that correct
Re: Economic growth question
No.
It is: 120 * (1.05) to the power of 14
I think you have x^y in your calculator (In some scientific calculator y is slightly next to but above x). Thus, you put 1.05 then press x^y then press 14 and then multiply the result by 120. The result would be in billion dollars (as unit of 120 is in billion dollars and x^y is just a number).
If your calculator is not scientific then:
Enter 1.05 then press * then press = .. you will get 1.1025 but do not stop there. Keep pressing = (12 more time, that would be 13 times if entering of first = is included) and all the while, number would keep increasing. This would be same as (1.05) to the power of 14 [or (1.05)^14]. Whatever answer you will get, multiply it by 120 to get the figure.
The result in scientific calculator or non-scientific calculator would be same as 1.05 multiplied by 1.05 multiplied by 1.05 continuously 13 times.
In non-scientific calculator, you do it 13 times because you have already multiplied one time mentally. If you start with figure 1.00 then multiply by 1.05, than you have to do it 14 time.
[This is not the case in scientific calculator as 'raising to the power' takes that into account. so you use 14 for y].
Re: Economic growth question
Thanks. :)
I suck at Maths.
Re: Economic growth question
Well, I hope you get it. Though calculating nominal GDP (in current US dollars or rupees), you have to take into account inflation and exchange rate (and yea, check my last mail again as I modified it a bit to make things easier).
Re: Economic growth question
On the basis of another measure also used by the IMF, Pakistan’s GDP is $405 billion, making it the 26th biggest economy in the world.
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
Re: Economic growth question
I am aware of PPP measurements. I prefer nominal data for sums, at exchange rates. PPP is dependent on the ER so is suseptible to greater fluctuations.
I did take A level Economics, I've just forgotten the formulae.
Re: Economic growth question
The latest government data released shows the per capita income has risen to $847, which would mean a current GDP closer to $140 billion.
http://www.finance.gov.pk/survey/sur_chap_05-06/01-Growth.pdf
In the late 90’s (98/99) the GDP was only $70 billion, which means it has doubled in the last 7 or 8 years.
Re: Economic growth question
Alhamdulillah.
Re: Economic growth question
The CIA site is pretty good, It gives you the GDP in real dollar terms as well as on PPP basis.
http://www.cia.gov/cia/publications/factbook/geos/pk.html#Econ
Re: Economic growth question
But the data is quite old.
Re: Economic growth question
CIA can’t find its a$$ on the map.. There are other professional institutions that can provide a better picture wrt economy… Beside, its not CIAs job to curnch numbers that is ofcourse if the nitwits know how to count.
Try World Bank, Asian Development bank, UN etc…
Re: Economic growth question
LBG, the data is upto the fiscal year 2005, so its pretty up to date. Abdali, this is not a debate on which site has more comprehensive data, obviously the CIA site is just to get a brief overview of the economy and other tidbits. If you have the site with more details provide it so as to help LBG.
Re: Economic growth question
I go by IMF/WB figs for economics. Them or Economist Intel Unit, those 3 being professionals and all.
Re: Economic growth question
In the calculations above, some assumptions are not correct. For example if we assume the inflation to be 50% then the calculation will show a very good economic growth. Actually higher the inflation lower is the growth.
Thus, using above figures, Pakistan nominal GDP growth would be
Multiply 1.07 by 1.05 = 1.1235. That is 12.35 percent nominal growth a year in rupees
Re: Economic growth question
I just checked a population growth chart, by 2020, we will have 250m people.
Saleem calculated a GDP in 2020 of 612 billion dollars (assuming 5% growth between now and then [thanks for the help yaar]), thus in 2020 we can expect a per capita income of $2448 nomimal. (2450)
Can someone work out a realistic PPP of that sum?