Although there are a few bright spots here and there, the economic downturn is taking a grim toll on the country’s industry.
By Staff Reporter
ISLAMABAD: Pakistan’s industrial output has persistently slipped for the last seven months and it declined by 7.9 percent in January 2023 over the same month a year ago, official data reveals.
Independent political economists attribute the downtrend, evident in data published by Pakistan Bureau of Statistics (PBS) the other day, to economic and political uncertainty in the country.
Large-scale manufacturing (LSM) output declined 4.4 percent in July-January FY23 compared to the same quarter last fiscal as costlier inputs due to rupee devaluation, high financing costs, and global slowdown took a toll. Several industrial facilities have either shut down or limited their operations during this period.
However, over the previous month (December 2022), LSM output went up 1.48 percent.
It is interesting to note that since the start of this financial year in July 2022, the output declined by 1.4 percent after continuously growing for the previous 21 months.
Earlier, the LSM growth remained negative from September 2019 to October 2020, mostly hampered by COVID-19.
Similarly, LSM dipped by 0.02 percent in August 2022, by 2.7 percent in September, by 7.63 percent in October, by 6.15 percent in November, by 3.51 percent in December, and by 7.9 percent in January 2023.
Major sectors that have high weightage in Quantum Index Number of LSM, saw their output contract. These include textile, food, coke & petroleum products, chemicals, automobile, pharmaceuticals, cement, and non-metallic mineral products.
For the persistent weakness in LSM, domestic factors and the global recession-like situation are to be blamed. Domestically, the high energy costs, rupee devaluation, and the government’s monetary and fiscal policies’ tightening and limiting imports due to a forex crunch were instrumental in the turndown. This will certainly affect GDP growth in FY23.
In FY22, LSM grew by 11.7 percent over FY21, mainly on the back of increasing global demand and favorable government policies to jack up the GDP growth as big industries contribute a tenth to the economy.
To curb the runaway inflation that reached nearly 50-year high in February 2023, clocking in at 31.55 percent, the State Bank recently jacked up the policy rate by 300 bps to 20 percent.
Since July 2021, the central bank has hiked the discount rate by 1300 basis points from 7 percent to 20 percent now. This has considerably affected industrial activities, as the measures made bank financing costlier.
The PBS data revealed that except for garments and football manufacturing, all other industrial segments showed a negative growth in their output in January 2023 over the same month last year.
On a year-on-year basis, in January 2023, textiles’ output was down 14.2 percent, pharmaceuticals 23.85 percent, non-metallic minerals 0.18 percent, iron and steel 8.76 percent, chemicals 17.4 percent (of which chemical products output was down 7.74 percent and fertilizer 23.58 percent) over the same month last year.
Similarly, machinery and equipment output also declined by 71.3 percent; automobiles by 60.45 percent, computer, electronics, and optical products by 38.5 percent; furniture 38 percent; wood products by 75.3 percent; tobacco by 11.68 percent; paper and board by 9.4 percent; rubber products 8 percent, coke & petroleum products by 1.8 percent; beverages by 0.15 percent, leather products 1.5 percent, and other transport equipment output went down by 27.5 percent over January 2022.
However, a few sectors that showed positive growth included garments up by 32.26 percent, footballs by 27.88, cement by 1.23 percent, and food by 0.04 percent.
Output during July-January FY23 as compared to the same period of FY22 has increased only in wearing apparel (garments) by 44.5 percent, leather by 4.98 percent, furniture by 73.8 percent, and football by 48.26 percent.
Food output in these seven months declined 1.9 percent, beverages 7.4 percent, tobacco 21.7 percent, textiles 13.2 percent, wood products 67.8 percent, paper and board 3.8 percent, coke and petroleum products 9.86 percent, pharmaceuticals 21.9 percent, rubber products 7.68 percent, non-metallic mineral products 10.2 percent, computer, electronics, and optical products 22.8 percent, machinery and equipment 51.9 percent, and automobiles 34.8 percent.
Besides, cotton yarn output was also down by 16.45 percent, cotton cloth by 8.7 percent, petroleum products by 9.86 percent and cement output dipped by 13 percent over last year.
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