Large-scale manufacturing (LSM) output declined by 5.5% in November 2022 as compared to the same month a year ago due to the government’s policy for controlling inflation, dollar scarcity, and import curbs.
Textiles, food, apparel, chemicals, automobiles, cement, and fertilizers are among the industries that have been impacted, according to data issued by the Pakistan Bureau of Statistics (PBS).
In October 2022, the output increased by 3.55% from the previous month. The average output decreased over the same period last year by 3.58% throughout the five months from July to November 2022.
Bank funding has become more expensive as a result of the government’s strategy of “quantitative tightening” and interest rate increases to control inflation. In addition, the lack of dollars and the government’s severe import restrictions have had a negative impact on the industrial sector. In recent months, factories have cut back on their operational days and hours, and more recently, some have reported closing down their facilities due to inventory shortages caused by the lack of foreign currency to import raw supplies.
As this sector makes for almost a fifth of the economy, Pakistan’s GDP may also suffer as a result of the decreasing industrial production. The federal government has also made indications that instead of the intended 5% increase, the actual rate may be closer to 3%.
In its most recent “Global Economic Prospects report,” the World Bank projected that Pakistan’s GDP will grow by 4% in FY23.
The Asian Development Bank (ADB) has earlier projected GDP growth at 3.5% in FY23, mainly as a result of quantitative tightening, which included reducing fiscal spending to balance internal and external imbalances.
In addition to capacity and input restrictions brought on by increased import prices due to the depreciation of the rupee, a decline in demand would also lower industry output.
The federal budget for 2022–2023 set a 5% economic growth goal for the government.
The LSM production decreased by 16.5% over June 2022 and 1.4% over July 2021 in July 2022, the first month of negative LSM growth in almost two years.
The majority of the sectors experienced negative growth in November 2022, according to PBS’s most recent monthly bulletin on LSM. However, just five of the 25 industry sectors covered by the LSM data—clothes, leather goods, furniture, football, drinks, Coke, and petroleum products—showed positive development.
However, the production of industries that were heavily weighted in the LSM’s quantum index number decreased. These included products made from non-metallic minerals, food, iron and steel, chemicals, automobiles, pharmaceuticals, and textiles.
On an annual basis, November 2022 has seen decreases in the production of textiles by 22%, pharmaceuticals by 8.34%, non-metallic minerals by 13%, food by 13.6%, iron and steel by 8.7%, chemicals by 7.06% (of which the production of chemical products was down by 6.15% and fertilizer by 7.74%), and cement by 12.1%.
In a similar vein, the production of machinery and equipment fell by 56%, that of automobiles by 18.97%, that of fabricated metals by 18.4%, that of rubber products by 9.3%, that of computer, electronics, and optical products by 29.8%, that of wood products by 80%, that of tobacco by 20.25%, that of paper and board by 1.7%, and that of other transport equipment by 41% over November 2021.
A few sectors that showed positive growth included garments up 49.7%, leather products 9.84%, furniture 36.4%, footballs 55.6%, beverages 9.97%, and coke and petroleum products up 5.26%.
Output during July-November FY23 as compared to the same period of FY22 has increased only in wearing apparel (garments) by 51.48%, leather by 9.84%, furniture by 99.3%, and footballs by 59.7%.
Whereas, food output declined by 7.78%, beverages by 5.4%, tobacco by 22.3%, textiles by 11.45%, wood products by 63.6%, paper and board by 2.8%, coke and petroleum products by 13.6%, pharmaceuticals by 23.2%, rubber products by 9%, non-metallic mineral products by 12.35%, computer, electronics, and optical products by 17.17%, machinery and equipment by 41.2%, and automobiles by 28.7%. Besides, the output of fabricated metal was down by 18.23%, iron, and steel by 0.87%, and other transport equipment declined by 42% over the same period of last year.
