The Pakistan Bureau of Statistics (PBS) reported that the country’s large-scale manufacturing (LSM) sector declined by 21.07% in April, marking the ninth consecutive month of loss.
The drop was widespread, with 20 of the 22 sectors reporting lower output. Only clothing and football witnessed increases in output.
Textiles, food, coke and petroleum goods, chemicals, automobiles, medicines, cement, fertilisers, iron and steel, furniture, leather items, electrical equipment, and non-metallic mineral products led the downturn.
Garments, which increased by 2.1%, and football, which increased by 3.45%, were the two biggest sectors to record a rise in output.
The LSM sector is a major economic driver in Pakistan, accounting for almost a quarter of the total GDP. The sector’s drop is a concerning indicator for the economy, which is already confronted with a number of issues, including high inflation, a growing current account deficit, and a falling rupee.
Economists blamed the slump on a combination of economic insecurity and the country’s ongoing political upheaval. They cautioned that the collapse might have negative effects such as job losses, a growing trade imbalance, and a slowing of economic growth.
Inconsistent rules, excessive bureaucratic impediments, and a lack of long-term planning, according to economists, have discouraged both domestic and foreign investment in the business. The persistent economic and political insecurity has also reduced investor confidence, causing a decline in manufacturing activity.
High energy costs, currency depreciation, and expensive financing from banks have all contributed to the sector’s negative growth. Several enterprises have been compelled to cut operating hours or scale back operations, while others have shut down their plants.
Manufacturing production in Pakistan has been declining since May 2023. In July, the first month of the fiscal year, the sector contracted by 1.86%. Since then, the deterioration has proceeded in a downward spiral.
It should be mentioned that the LSM growth rate in March 2023 was -25%, which fell to -21.07% in April. Industrial output fell 9.4% from July to April of the current fiscal year, compared to the same ten-month period last year. Similarly, LSM output fell -9.78% in April compared to the previous month.
In fiscal year 2021-22, Pakistan’s manufacturing industry grew by 11.7% over the previous year. This expansion was attributable to rising worldwide demand and supportive government measures that not only boosted the sector but also contributed significantly to overall GDP development.
In April 2023, the output of the following sectors decreased year on year:
- Textiles — 33.3%
- Pharmaceuticals — 32%
- Food — 5.9%
- Non-metallic minerals — 24.5%
- Iron and steel — 10.2%
- Chemicals — 7.9% (of which chemical products output was down 15.1% and fertiliser reduced by 2.6%)
- Machinery and equipment — 43.3%
- Automobiles — 75.5%
- Cement — 23.8%
- Sugar — 92.5%
- Cotton yarn production — 29.9%
- Cotton cloth — 17.5%
- Petroleum products — 20.4%
- Cement production — 23.8%
- Computer, electronics, and optical products — 37.8%
- Furniture — 15.9%
- Wood products — 9.8%
- Tobacco — 61.6%
- Rubber products — 13.4%
- Leather products — 0.86%
- Fabricated metal — 26%
- Electrical equipment — 28.1%
- Other transport equipment — 49.3%
According to the PBS, output climbed by 27.36% in clothing, 2.15% in leather, 40.6% in furniture, and 30.76% in football during July-April FY23 compared to the same period in FY22.
During the same period, food output fell 8.5%, beverages 3.8%, tobacco 27.45%, textiles 17.86%, wood products 64%, paper and board 7.1%, petroleum products 11.24%, chemicals 6.4%, pharmaceuticals 24.3%, rubber products 8.6%, non-metallic mineral products 11.76%, iron and steel 4.65%, fabricated metals 15%, computer, electronics, and optical products 27.65%, machinery and equipment 45.5%, electrical equipment 13%, and automobiles 45.6%.
Likewise, cement output also declined by 13.8% in these ten months, sugar 15.4%, cotton yarn 20.5%, and cotton cloth production down 11.4% over the same period of last year.