Amid COVID-19, country’s prosperity index plunges downward
ISLAMABAD-The third issue of Pakistan Prosperity Report (PPR) stated that amid the coronavirus pandemic, Prosperity Index has plunged downwards. Large-scale industrial manufacturing has decreased and so has the trade volume. Meanwhile the reduced demand has led to an improvement in inflationary pressure on the economy and private sector long term credit borrowing is witnessing an improvement on the back of lowered discount rate.
The report notes that during the months of March and April 2020, Pakistan witnessed a sharp deterioration in prosperity. It is due to a contraction in trade volume and large scale industrial manufacturing output whereas inflation rate has seen a noteworthy improvement. As calculated on a month-to-month basis, the month of April witnessed deflation in Consumer Price Index. The report notes increasing signs of economic contraction due to the state smart lockdown in the domestic economy.
Policy Research Institute of Market Economy (PRIME) launches its third edition of PPR, for the very reason to provide a monthly review of Pakistan’s macro-economy based on the analysis of four variables: Industrial production, trade volume, price levels, and private sector lending. In April, the trade volume decreased by 15.8 per cent as compared to March however the monthly trade deficit grew by 55 per cent. Imports saw an increase whereas exports went down. Manufacturing facilities were ordered close by the government and road, rail and air transportation services were also suspended.
Moving on, while the businesses are starting to resume their manufacturing operations, government-imposed SOPs are proving to be a bit difficult to enforce in true letter and spirit. While the supply-side constraints are gradually resolving, demand-side constraints are leading to organizations scaling down on their manpower, the effects of which shall come to the fore in upcoming issues of this report. On the positive side, a reduction in the policy rate to 8.5 per cent has resulted in increased demand for long term credit from the private sector.