Trade Deficit

Trade Deficit

Is it good for Economy!! By Dr.Ahmed Sohaib Class of Spring 2008 Mahummad Ali Jinnah University

OR

Export – Import & Trade Balance An export is any good or commodity, transported from one country ( home country ) to another country in a legitimate fashion, typically for use in trade. An import is any good or commodity, brought into one country from another country in a legitimate fashion, typically for use in trade. Import goods or services are provided to domestic consumer by foreign producer.

Trade Balance (or net exports) The value of a country’s exports less the value of its imports in a particular period (quarter or year)

Deficit

In terms of Economy, Deficit refer to More expenditure and less revenue.

Trade Deficit….. a negative balance of trade is known as a trade deficit or, informally, a

trade gap

the difference between the monetary value of export and IMPORTS in an economy over a certain period of time. A NEGATIVE balance of trade is known as a

Disadvantages of a Bigger Trade Deficit • Loss of manufacturing jobs • industries may be completely shutdown. • The country to depend entirely on foreign sources. • Most serious, if the trade deficit becomes so large that the value of the currency falls below equilibrium, then the advantages of vigorous productivity growth and low inflation start to disappear.

Benefits of a Bigger Trade Deficit • Consumers gets… • A larger variety. • Better quality.

• lower prices for traded goods. also apply to capital goods.

• Vigorous foreign competition boosts…. • productivity. • reduces inflation. • also keeps interest rates low

• Increase in foreign saving helps to fund capital spending and boosts financial market prices

PAKISTAN WHAT DO YOU THINK ABOUT PAKISTAN TRADE OVER DECADES

?

Factors Effecting Trade Deficit The reasons of TRADE DEFICIT in Pakistan….. • Failed Trade Policy. • Less Production against high Demand. • Instability of the Government Structure. • Less adaptation of the Modern Technology. • Prices of goods manufactured at home • Exchange Rates • Trade agreements & barriers • Other Taxes & tariff and trade measures • Business Cycle @ home & abroad.

Exchange rates: Pakistani rupee (PKR) per US$1

60.50 (01/11/07) 60.75 (05/08/2007) 58 (2004) 57.752 (2003) 59.7238 (2002) 61.9272 (2001) 53.6482 (2000) 51.90 (1999) 44.550 (1998) 40.185 (1997) 35.266 (1996) 30.930 (1995)

Macro Economy of Pakistan 7.5% GDP

Ultimate Objective: 1) Create jobs, 2) Raise incomes and 3) Reduce poverty 7.9% Inflation

4.2% Fiscal Deficit Public debt 53.4% External Liab. 27.1%

Per Capita Income US$ 925. Investments: 23% Trade

162797000 population

Tax-GDP ratio:10.5% Saving: 18%

Banking spread:6.4-7.8%

Export : $10.15B Import : $20.48B

Trade deficit: 9% Current account: 5%

Stable exchange rate:.7% dep. last year Forex covers almost 6 months of imports Raising capital both debt and equity from international markets

20 million banking clients with less then 6m borrowers Low level of investments in the social sector Economic Survey of Pakistan 2005-06

An Over View of Pakistan Imports & Exports (1998-2007)

Source: SBP

Major Export Pattern of Pakistan 2005-2007

Major Export Pattern of Pakistan 1996-2007

Pakistan Imports 1996-1997 (% Shares )

16

Pakistan Imports

2006-2007 (% Shares )

17

Major Import Pattern of Pakistan 2005-2007

Major Import Pattern of Pakistan 1990-2007

JAPAN..

A SURPLUS STATE.

• Japan has continued to produce a trade surplus since 1981. • In terms of Japan's international trade exports showed an annual increase of 14.6 percent to 75.25 trillion yen, marking the fifth consecutive year of increase. • Imports grew by 18.3 percent to 67.34 trillion yen, thus increasing for the fourth consecutive year.

Japan…. • Major reasons JAPAN is a historical surplus state. – – – – –

Advancement of Technology High skilled Labor. Effective trade Policy. Strong government support. Productions meet the demands.

FOREIGN TRADE AND COMPONENT RATIO OF F.T.

THANK YOU & ALLAH HAFIZ References • • • • • •

www.wikipedia.org www.Accountancy.com.pk www.sbp.gov.pk www.statpak.com.pk www.pakboi.gov.pk www.stat.go.jp/english