remains upbeat on industrial growth prospects

KARACHI: The World Bank expressed optimism over Pakistan’s industrial growth prospects during the current fiscal year despite a slowdown in growth pace.  

The Bank projected industrial growth at seven percent for the current fiscal 2017/18 and 7.7 percent for the next fiscal year. “Industry continues to grow, though the momentum has slowed down,” it said in the latest Pakistan Development Update report.  

The industry sector, which accounts for 20 percent of GDP, grew five percent during the last fiscal 2016/17, lower than the 7.7 percent target as against 5.8 percent in the preceding fiscal year.

The Washington-based lender said mining and quarrying growth fell to 1.3 percent in FY2017 as compared to seven percent in FY2016, while construction sector normalised to nine percent from 15 percent earlier. Electricity and gas generation and distribution rose only three percent as compared to eight percent, mainly because generation declined, it added.

The World Bank said manufacturing sector, which is the largest component of industry, grew 5.3 percent in FY2017 as against 3.7 percent in FY2016. Large scale manufacturing (LSM) posted a five percent growth during the last fiscal year as compared to three percent a year earlier.

The Bank attributed the growth to increase in production of sugar, steel products, electronics and tractors. Cigarette production declined due to an increase in the federal excise duty on existing tiers of cigarettes, and the addition of a new tier to document and curb the illicit trade of substandard, low-priced cigarettes, it said.

It said credit to the private sector – mostly businesses – increased 16.8 percent year-on-year or Rs748 billion. “The improvement in credit off-take was concentrated in the manufacturing sector (food products and beverages and textiles).

The World Bank termed strong consumption as key driver to a decade-high growth in the country. “Total consumption expenditure made up almost 92 percent of GDP and contributed nearly eight percentage points toward GDP growth,” it said. “Private consumption dominated this category, supported by rising income levels, higherdomestic demand, strong growth in the services sector, steady growth in small-scale manufacturing and recovery in agriculture.”

Private consumption grew 8.6 percent in FY2017. The Bank, however, revised down its outlook for private consumption to 4.8 percent in the current fiscal and five percent in FY2019. Capital expenditures in China-Pakistan Economic Corridor (CPEC) projects augured well with external account as well as boosted production of steel and construction materials required for infrastructure uplift.

“Investment is expected to grow moderately due to higher capital expenditures by the government and increase in FDI (foreign direct investment) and external loans for CPEC projects,” the World Bank said.