IT exports fall 14 percent YoY in March amid low business confidence

KARACHI: Pakistan's information technology (IT) exports declined by 14 percent year-on-year in March as many companies opted to keep a major portion of their proceeds outside the country due to low business confidence, according to a brokerage report released on Thursday.

In nine months of the current financial year, IT exports have remained flat at $1.94 billion as compared to the same period last year. The reported IT export numbers indicate the amount remitted back to Pakistan by technology companies.

“According to our channel checks, IT companies are retaining a greater portion of their proceeds outside the country due to declining confidence in the country’s economic fundamentals,” Topline Securities said in the report.

The decline in March’s IT export numbers was contributed by 16 percent fall in computer services in the month. Pakistan is likely to miss its $5 billion IT exports target for the financial year 2023, as the country has managed to reach only $1.94 billion in 9 months of FY23. Other than low business confidence in the country amid both political and economic uncertainty, a global slowdown in IT spending has also played a catalyst role. Gartner (technology research and consulting firm) reported that 2022 global IT spending slowed down to 0.5 percent in 2022, compared to 9.5 percent growth in 2021.

The month-on-month (MoM) data of IT exports showed a recovery of 14 percent in March, helped by 51 percent MoM increase in telecom and 8 percent in computer services. Among computer services, other services increased by 11 percent and software consultancy by 10 percent MoM, while computer software remained flat.

The MoM recovery is also the result of reduction in a gap between interbank and grey market rates, according to the report, which shared that the 6-month rolling average of IT exports was around $218 million.

On a broader level, a slowdown has been witnessed after April 2022, with YoY growth averaging 1 percent in May-22 to Mar-23, compared to average 32 percent YoY growth in prior eleven-month period from Jun-21 to Apr-22.

As a result of MoM recovery in Mar-23, IT exports as a percentage of total exports increased to 7.3 percent, compared to 6.9 percent in Mar-22 and 7.0 percent in Feb-23. In 9MFY23, IT exports as a percentage of total exports stand at 7.3 percent, compared to 6.7 percent in 9MFY22.

Segment wise breakdown for the month of March 2023 indicated that telecom services increased by 51 percent MoM and decreased by 5 percent YoY to $44.6 million and computer services increased by 8 percent MoM and decreased by 16 percent YoY to $177.5 million.

The total share of telecom/computer services exports for March 2023 stood at 20pc/80pc respectively, compared to 18pc/82pc share in March 2022. In 3QFY23, share of telecom/computer services stood at 17/83pc, compared to 18/82pc in 3QFY22.

In 9MFY23, telecom/computer share of exports stood at 19pc/81pc, compared to a similar share in 9MFY22. It’s because computer services exports remained flat YoY in 9MFY23, however, computer software increased by 6 percent YoY.

Net IT exports (exports-imports) during 9MFY23 increased by 17 percent YoY to $1.72 billion, compared to flat YoY overall IT exports number. Net IT exports on TTM basis as of Mar-23 also grew by 17 percent YoY to $2.25 billion. Mar-23 monthly number decreased by 2 percent YoY to $200 million.

Going forward, despite the global slowdown, software and IT services spending is expected to increase by 12 percent and 9 percent respectively in 2023, according to Gartner research, against the overall growth estimation of 5.5 percent for 2023.