LSM growth contracts by 24.8pc due to slowdown in economic activities
ISLAMABAD-Pakistan’s large-scale manufacturing (LSM) growth shrank by 24.8 percent in May this year due to slowdown in economic activities amid outbreak of Covid-19. The LSM growth declined by 10.32 percent during eleven months (July to May) of the previous fiscal year, which showed that economy had slowed down across various sectors. The government has blamed the recent COVID-19 crisis for contraction in LSM growth, which had brought economic activity to a near-halt, both domestically and globally.
The LSM, which has 78 percent share in manufacturing and 9.5 percent in GDP, is continuously recording negative growth from last couple of years. FY2019 has proved to be a hard year for LSM as it recorded negative growth of 2.28 percent. LSM sector was not able to withstand constrained economic environment triggered by exchange rate depreciation and contractionary monetary and fiscal policies. Later in eleven months of FY2020, the LSM had recorded negative growth of 10.32 percent.
The latest data of Pakistan Bureau of Statistics (PBS) showed that growth of big industries like textile food, beverages, pharmaceutical; chemical, leather and iron, automobiles and steel sectors had declined in July to May period of previous fiscal year. The government had set LSM target of 3.1 percent for the year 2019-20. However, the government might not achieve the LSM growth target due to the performance of major industries in eleven months of the last fiscal year.
According to the PBS, production data of 11 items from Oil Companies Advisory Committee had registered a negative growth of 1.2 percent in July to May period of the year 2019-20. Similarly, the LSM data, provided by the Ministry of Industries and Production for 36 items, had also shown negative growth of 7.85 percent during the period under review. However, the data provided by the provincial Bureaus of Statistics for 65 items had recorded negative growth of 1.2 percent over the same period. The negative growth is mainly the outcome of dip in production of automobiles that went down by 44.79 percent and wood products by 38.87 percent. Similarly, production of electronics products had declined by 25.63 percent. Meanwhile, production of coke and petroleum had decreased by 20.87 percent, followed by engineering, whose production declined by 18.16 percent. Production of chemicals had also gone down by 7.53 percent. The data showed that production of leather decreased by 6.06 percent.
Meanwhile, according to the PBS data, fertilizer had recorded growth of 5.64 percent; rubber products 2.86 percent and paper and boards had also recorded growth of 2.12 percent during the period under review.
In auto sector, tractors production went down by 38.36 percent, light commercial vehicles 51.42 percent, trucks 52.68 percent, jeeps and cars 54.5 percent and motorcycles 25.99 percent during the period under review.
Automobile sector has remained in distress for the second consecutive year with a massive fall during FY2020. The last year began with imposition of ban on non-filers accompanied with escalating exchange rate which kept the industry in turmoil. Resultantly the year ended with massive fall in production and the sales. The current year has also witnessed new taxes like Federal Excise Duty (FED), Additional Custom Duty (ACD) and minimum value addition tax, while the exchange rate also kept escalating. Besides, industrial fall continued to grip the automobile sector with uncertainty and the sector has almost reduced to half during the period. There has been fall all over the local auto industry during the last financial year.