Trade deficit shrinks 7% in July-October over previous year

Exports rise on seasonal demand, imports fall for fourth straight month.

ISLAMABAD:

Pakistan’s trade deficit shrank significantly from July through October this year due to a fall in imports for four consecutive months and a gradual pick in exports on the back of a seasonal rise in global demand of certain goods.

The trade deficit – a measure of how much imports exceed exports – shrank by almost 7% to $6.5 billion from July to October 2012, as against $6.9 billion in the corresponding period of the preceding fiscal year.

The latest trade statistics, released here on Tuesday by the Pakistan Bureau of Statistics, show that the trade deficit has shrunk for the third consecutive month due to falling imports. The figures further show that after declining for first two consecutive months, exports have registered an increase for the second month in a row. However, the rise in exports is attributed to an increase in the exports of food products, which is a seasonal phenomenon.

Notwithstanding the ‘improvement’ in the balance of trade, the trend also suggests a possible slowdown in the country’s economic activities. Independent experts say that the decline in imports, and the consequent narrowing down in the deficit, poses a challenge to policymakers who are scrambling to address imbalances in the economy. This is the fifth month of the current fiscal year, but the government has as yet failed to announce a trade policy for the current fiscal year.

In the period under review, exports grew almost 5% year-on-year: goods worth $8.2 billion were exported – an increase of $389 million over the previous year. On the other hand, imports plunged 0.54% to $14.7 billion, which was $80 million less than last year’s corresponding import bill.

Asad Sayeed, a senior researcher at the Collective for Social Science Research, said that the narrowing of the trade deficit due to the pick in exports was encouraging. He, however, cautioned that the trend could reverse in the coming months as most of the increase was because of seasonal exports.

Month-on-month trade data also suggests that the accumulative growth in exports of almost 5% may not last long. On a monthly basis, exports plunged 9.2% in October over September 2012, while imports grew by 8.1%. The trade deficit widened 37.8% due to plummeting exports and growing imports.

A yearly comparison of monthly trade figures presents yet another scenario. In October, exports rose 7.2% year-on-year. The country exported $2.1 billion worth of goods, $136 million higher than the exports made last October, according to the PBS. Imports also grew by 5.1% in the previous month to $3.8 billion – $183 million higher than October 2011’s figure. Resultantly, the trade deficit widened marginally by 2.7% to $1.8 billion.

In its latest assessment on Pakistan’s economy, the IMF revised Pakistan’s growth projection downwards to 3-3.5% against the official target of 4.5%. But the finance minister on Tuesday said that the economy will grow by over 4%, as the country was not affected by floods this year.

Published in The Express Tribune, November 14^th, 2012.