ISLAMABAD: Pakistan’s big manufacturing industries including food, textile, petroleum oil, pharmaceutical and automobiles reported a cumulative drop of 7.75% in October 2022 compared to the same month of previous year.
On a month-on-month basis, the large-scale manufacturing (LSM) sector posted a decline of 3.62% in the month under review compared to the previous month of September 2022, Pakistan Bureau of Statistics (PBS) reported on Thursday.
Arif Habib Limited (AHL) Head of Research Tahir Abbas explained that the government’s past attempts to cool down the overheated economy, tackle the flood crisis and now deal with the foreign exchange crisis have slowed down economic activities beyond the set targets.
“The planned economic slowdown has been overplayed due to the unexpected floods and external shocks (high global commodity prices). The drop in the LSM sector output is reflecting the trend in growth,” he added.
The central bank revised down its projection for economic growth to 2% for FY23 last month, as compared to the pre-floods projection of 3-4%. The government had targeted a growth rate of 5% at the outset of the year.
The share of LSM in gross domestic product (GDP) stood at 9.25% during FY22, according to Pakistan’s Economic Survey 2022.
“The LSM sector would continue to give low output during the remaining eight months (November-June) of the current fiscal year, due to the lack of financial capacity to import raw material and reduced demand for goods in the country,” Abbas stated.
“Pakistan lacks foreign exchange reserves to import raw materials these days,” he noted.
The government has controlled imports through administrative measures to manage with four-year low reserves of $6.7 billion.
“Besides, the high inflation reading and high cost of borrowing (the central bank’s key policy rate) have made the working environment challenging,” he remarked.
Abbas hoped that the LSM sector and overall economic activities would start normalising in the next fiscal year, when inflation reading and the central bank’s policy rate would soften.
PBS reported that the LSM sector’s output fell 2.89% cumulatively in the first four months (July-October) of current fiscal year, as compared to the same period last year.
