The large-scale manufacturing (LSM) sector has grown 7.45% in the first eight-month (Jul-Feb) of current fiscal year 2021 amid third wave of the Covid-19 pandemic in Pakistan, according to the Pakistan Bureau of Statistics (PBS).
The LSM growth would largely offset impact of poor cotton production in agriculture sector and extend the much-needed support to the overall economic growth in the year.
Out of total 15 sectors in LSM, eight have posted growth. These include textile, automobiles, fertilisers, pharmaceuticals, food, beverages and tobacco, coke and petroleum products, chemicals and non-metallic mineral products.
However, output of seven sub-sectors contracted, which were including iron and steel products, electronics, leather products, paper and board, engineering products, rubber products and wood products.
“The LSM Index output increased by 4.85% for (the single month of) February 2021 compared to February 2020,” PBS reported. “The LSMI decreased by 4.15 % compared to January 2021.”
Pak-Kuwait Investment Company (PKIC) Head of Research Samiullah Tariq said the LSM output declined in February compared to January due to imposition of partial lockdown in some areas nationwide amid third wave of the pandemic in the country and lesser number of days in February.
“The robust latest production numbers reported by automobile and cement sectors for March…and robust inflows of workers’ remittances, export earnings and revenue collection on taxes in the month suggest that slowdown in LSM in February is a temporary phenomenon and it would revert in March,” he added.
The government fully supports housing and construction sector with the aim of reviving industrial production amid Covid-19 pandemic. It provided different tax incentives and awarded subsidiary on housing and construction loans, as it is of the view that the strategy would enable construction and allied industries to grow and extend much-needed support to gross domestic product (GDP).
The government has targeted to achieve GDP growth of 2.1% in the ongoing fiscal year 2021. The central bank remains confident the country would achieve an economic growth of 3% despite the third wave of the pandemic in the country. The Ministry of Finance anticipated the growth at 2.6% to 2.8%.
However, the International Monetary Fund (IMF) forecasted economic growth at 1.5% recently, which is half of what the State Bank of Pakistan (SBP) has projected. The World Bank’s outlook stands at 1.3% in FY21. The central bank said the economic indicators stood strong even as the number of coronavirus infections in the country soared.
The government has decided to impose smart lockdown in areas where the rate of infection is at 15%. Special Assistant to the Prime Minister (SAPM) on Health Dr Faisal Sultan said the other day that the coronavirus disease has severely affected the country’s healthcare system and “the situation is worse than that in June last year”.
Read more: LSM grows 11.4% in December
A worsening situation is ringing an alarming bell, as it carries the potential to partially impact industrial out as well. The PBS reported that the textile sector grew 2.69% in the July-February period of the ongoing fiscal year compared to 0.33% in the same period of last year. Automobile sector surged 14.66% in the period compared to contraction of 35.93% in the corresponding period of last year. Food, beverage and tobacco sector increased 15.75% compared to contraction of 1.87%. Non-metallic mineral products surged 20.77% compared to 4.35%. Fertiliser sector jumped 5.66% in July-February period of FY21 compared to 5.99% in the same period of last year.
However, wood products contrasted 51% in the first eight-month of FY21 compared to growth of 1.46% in the same period of the last year. Leather products dropped 40.5% compared to growth of 10% in the same period of last year. Engineering products declined 30% compared to a contraction of 3.32%. Electronic decreased 24% in July-February 2021 compared to a drop of 4.5% in the same period of the last year, according to PBS.
Published in The Express Tribune, April 14th, 2021.