LSM sustains growth momentum

Sector registers cumulative growth of 7.4% in July-November of FY21

ISLAMABAD:

The output of Pakistan’s large industries increased 7.4% in the first five months of current fiscal year on the back of a sustained growth momentum for the third successive month, reported the national data collecting agency on Tuesday.

The Large-Scale Manufacturing (LSM) sector registered a cumulative growth of 7.4% in July-November of current fiscal year, reported the Pakistan Bureau of Statistics (PBS).

But factories have not yet achieved the production levels seen before the first wave of the coronavirus hit the country in late February last year.

November was the third successive month when the index grew over the previous month, strengthening the industrial revival and boosting prospects of achieving annual economic growth target of 2.1%.

Out of 15 major sectors, 10 sectors recorded positive growth while output of five sectors, being monitored by the federal and provincial governments, contracted in the first five months of current fiscal year, according to the PBS. The government had expected 2.5% contraction in the LSM sector in the current fiscal year, according to the Annual Plan 2020-21, which may now turn positive at the end of the year.

The LSM sector recorded a 14.5% year-on-year growth in November 2020, according to the PBS.

“November’s large-scale manufacturing growth is the highest LSM growth in any month in the last 12 years,” tweeted Minister for Planning Asad Umar. But the index was still below the level of 160.2 points recorded in March last year. The index jumped to 147.3 in November 2020.

The annualised LSM growth may slow down in December 2020 due to a high base effect as the index had surged to 149.4 in December 2019. On a year-on-year basis, the petroleum sector posted less than 1% growth in November over the same month of previous year.

Provincial bureaus also reported a nominal growth of 2% in 11 sectors that they monitored. The Ministry of Industries, which followed the output of about 15 sectors, reported 12.4% growth in November over the same month of preceding year.

On a month-on-month basis, the LSM sector showed only 1.4% growth in November over October 2020.

Pakistan needs 6-7% annual economic growth to reduce poverty and unemployment, according to independent economic experts.

Data collected by the Oil Companies Advisory Committee (OCAC) showed that 11 types of industries registered average growth of just 0.09% in the first five months of current fiscal year.

The Ministry of Industries, which monitors 15 industries, reported 5.5% growth in the LSM output. Provincial bureaus reported a growth of 1.9% in 11 sectors in five months, according to the PBS. One of the reasons behind the higher growth in November was early start of sugarcane crushing season. In November 2020, sugar mills produced 458,435 metric tons of sugar, which was 100% higher than the same month of previous year.

Sectors that posted growth during the July-November period included textile which grew 2.4% and non-metallic mineral products which soared 22.6%. The fertiliser sector grew 6.6% whereas the food, beverages and tobacco group output increased 21.2% in the five-month period.

Manufacturing of chemical products increased nearly 10%, paper and board 10.6%, automobiles 5.9% and rubber products 8.5%. The pharmaceutical sector registered a growth of 13% and output of the coke and petroleum sector increased 1.5%.

The sectors which registered a dip in their production included iron and steel whose production fell 3.7%, electronics 18%, leather products 43%, engineering products 32.6% and wood products 65% during the July-November period. The World Bank released a new report titled “Global Economic Prospects” last week, which showed a gloomy picture of Pakistan’s economy.

In 2020-21, Pakistan’s economy is projected to grow at a rate of only 0.5%, the seventh lowest in South Asia after Sri Lanka, according to the World Bank. But the State Bank of Pakistan (SBP) has projected that GDP growth will be in the range of 1.5% to 2.5% in FY21. The Ministry of Finance also sees growth in the range of 2.6% to 2.8% against the target of 2.1% due to better-than-expected output in the industrial and agriculture sectors.

The World Bank said that growth was projected to be held back by continued fiscal consolidation pressures and services sector weakness.

“Pakistan’s economic growth potential has fallen to 3.5% due to low investment compared with the region,” Shabih A Mohib, World Bank’s Programme Leader on Equitable Growth said while speaking at The Express News programme, The Review.

He said that since the growth potential had gone down, the World Bank projected only 0.5% economic growth for this fiscal year.

Published in The Express Tribune, January 13^th, 2021.

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