Economic gains may slow down: survey
Inflation, weak demand, energy shortages and high cost cited as reasons.
ISLAMABAD:
The economic gains made after devastating floods last year may slow down in the months ahead due to inflationary expectations, slack market demand, energy shortages and high cost of capital, finds a survey.
“The economy appears to have braved the devastating blow dealt by the floods and a sense of moderate optimism has re-emerged… however, a consistent increase in the cost of production has the potential to undermine this optimism,” shows the Business Barometer survey, conducted by the Pakistan Institute of Development Economics.
The Business Barometer, a biannual feature, captures the expectations of business enterprises regarding their business activity, prices and constraints.
According to the survey, the respondents expected that the trend of price spiral would continue in the months ahead. Majority of the firms blamed the increase in the cost of production to a rise in consumer prices.
Almost all the respondents reported an increase in input prices from July-December 2010 and they expected to face similar trend during January through June. Fifty-three per cent firms registered a 10 per cent increase in the cost of production while 27 per cent expected a further increase of 10 per cent in the first half of the current calendar year.
Two-third of the respondent firms said that prices of their final products increased from July to December 2010, with almost all citing the increase in the cost of production as the reason. They expected that the trend would continue and prices of final products would further rise.
Two-third of the firms said they increased wages of their employees and expected that the trend would continue.
The businessmen found slack market demand, energy shortages and high cost of capital as major constraints to businesses, which could undermine the gains the economy achieved after last summer’s floods.
Though the firms indicated availability of energy as a constraint to doing business, this did not seem to have significantly impacted production volume. One reason could be that the energy constraints having become persistent, the firms have made some alternative arrangements like use of generators and adjustment in working hours. However, these initiatives were adding to the cost of production.
Almost half of the firms posted a modest increase in their business volume during July-December 2010 and they also remained moderately optimistic about the growth in business volume during January-June 2011. Capacity utilisation also showed changes that corresponded to the growth in production and sales volume.
Published in The Express Tribune, April 12th, 2011.
The economic gains made after devastating floods last year may slow down in the months ahead due to inflationary expectations, slack market demand, energy shortages and high cost of capital, finds a survey.
“The economy appears to have braved the devastating blow dealt by the floods and a sense of moderate optimism has re-emerged… however, a consistent increase in the cost of production has the potential to undermine this optimism,” shows the Business Barometer survey, conducted by the Pakistan Institute of Development Economics.
The Business Barometer, a biannual feature, captures the expectations of business enterprises regarding their business activity, prices and constraints.
According to the survey, the respondents expected that the trend of price spiral would continue in the months ahead. Majority of the firms blamed the increase in the cost of production to a rise in consumer prices.
Almost all the respondents reported an increase in input prices from July-December 2010 and they expected to face similar trend during January through June. Fifty-three per cent firms registered a 10 per cent increase in the cost of production while 27 per cent expected a further increase of 10 per cent in the first half of the current calendar year.
Two-third of the respondent firms said that prices of their final products increased from July to December 2010, with almost all citing the increase in the cost of production as the reason. They expected that the trend would continue and prices of final products would further rise.
Two-third of the firms said they increased wages of their employees and expected that the trend would continue.
The businessmen found slack market demand, energy shortages and high cost of capital as major constraints to businesses, which could undermine the gains the economy achieved after last summer’s floods.
Though the firms indicated availability of energy as a constraint to doing business, this did not seem to have significantly impacted production volume. One reason could be that the energy constraints having become persistent, the firms have made some alternative arrangements like use of generators and adjustment in working hours. However, these initiatives were adding to the cost of production.
Almost half of the firms posted a modest increase in their business volume during July-December 2010 and they also remained moderately optimistic about the growth in business volume during January-June 2011. Capacity utilisation also showed changes that corresponded to the growth in production and sales volume.
Published in The Express Tribune, April 12th, 2011.