The reasons behind the flat growth in LSM included 18% rupee depreciation and 175-basis-point hike in the benchmark interest rate in the past nine months. PHOTO: FILE
Pakistan’s manufacturing industries like textile, food, fertiliser, automobile and construction are apparently facing some trouble as a majority of them have reported negative growth or a slowdown in growth.
The large-scale manufacturing (LSM) sector, which has around 11% share in the gross domestic product (GDP), grew a mere 0.5% in July 2018 compared to 14.45% in the same month last year, reported the Pakistan Bureau of Statistics (PBS).
Textile exports drop 16% after rebate reduction
“The slowdown in LSM indicates overall economic slowdown in the country,” remarked Arif Habib Limited Head of Research Samiullah Tariq while talking to The Express Tribune. “It may be attributed to the rise in inflation and the drop in people’s purchasing power,” he said.
Topline Securities’ analyst Umair Naseer said the other day that the reasons behind the flat growth in LSM included 18% rupee depreciation and 175-basis-point hike in benchmark interest rate to 7.5% in the past nine months.
Earlier, State Bank of Pakistan (SBP) Governor Tariq Bajwa said the central bank was using both the tools - rupee depreciation and interest rate hike - to reduce aggregate demand in a bid to narrow down current account and fiscal deficits in the overheated economy.
Many businesses, including foreign firms, have halted their expansion plans before clarity on the economic front as the Pakistan Tehreek-e-Insaf (PTI) government is presently reshaping the policies.
The SBP reported that the textile sector recorded a negative growth of 0.5% in July 2018 compared to a 1.16% rise in the same month last year.
The pharmaceuticals sector fell 10.80% in July this year compared to an increase of 11.92% in July 2017.
The chemical sector fell 2.44% compared to a rise of 4.40%; iron and steel product sector dropped 2.77% compared to an increase of 46.36%; fertiliser sector fell 6.81% compared to a decrease of 0.80% and wood product sector suffered a massive decline of 55.64% compared to a growth of 21.27% in July 2017.
On the other hand, the automobile sector posted a growth of 9.75%, but it was much lower than the growth of 45.75% in July 2017. Similarly, the electronics sector surged 11.74% compared to 16.54% last year. The food, beverages and tobacco sector improved 3.24% compared to 21.80% in the same month last year.
‘Dire need to upgrade textile industry’
The non-metallic mineral product sector edged up 0.53% compared to 36.28%. Paper and board sector grew 4.67% compared to 28.42% whereas engineering product sector surged 13.18% compared to 32.33%
Coke and petroleum products increased 6.14% from 4.49%. Leather products sector reported 1.19% growth compared to a negative growth of 5.98% in July 2017. Rubber products sector rose 8.31% in the month compared to a negative growth of 0.59% in July 2017.
Published in The Express Tribune, September 26th, 2018.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ