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July 22, 2020

LSM contracts 10.3 percent in July-May

Business

July 22, 2020

KARACHI: Large scale manufacturing (LSM) contracted 10.3 percent for the first 11 months of the last fiscal year of 2019/20 as most of the industrial activities witnessed sharp decline during the period, official data showed on Tuesday.

The production significantly decreased for textile, food, beverages and tobacco, coke and petroleum products, pharmaceuticals, automobiles, iron and steel products and electronics in July-May FY2020 over the corresponding period a year earlier, while it showed upward trend in fertilisers and paper and board sectors, according to the Pakistan Bureau of Statistics (PBS).

In May, LSM output plunged 24.8 percent year-on-year in May, but it showed a noticeable recovery of 20.5 percent when compared to April 2020. This sequential growth was mainly due to ease in lockdown associated with coronavirus outbreak. The government had imposed lockdown in late March.

LSM, which accounts for 78 percent in overall manufacturing and 9.5 percent in GDP, has been witnessing downfall for the last two years. It also recorded a negative growth of 2.28 percent in FY2019.

“LSM sector was not able to withstand constrained economic environment triggered by exchange rate depreciation and contractionary monetary and fiscal policies,” according to the latest economic survey.

Pakistan envisaged GDP growth rate at 1 percent for the current fiscal year against negative 0.4 percent for the last fiscal year of 2019/20. Rupee lost seven percent of its value against the US dollar year-to-date, increasing cost of imports and production for industries that largely depend on imported inputs.

The government’s tendency to cut import bill through regulatory duties and administrative measures upset industrialisation process and so much so that the government has been consistently warned of de-industrialisation.

The year-on-year decline in May was triggered by 30.5 percent contraction in textile, 36.2 percent in non-metallic mineral products, 79 percent in automobiles, 81.6 percent in electronics, 31.2 percent in iron and steel products, 18.2 percent in coke and petroleum products, 53.9 percent in leather products and 27.6 percent in chemicals. However, pharmaceuticals, fertilisers and food, beverages and tobacco witnessed an increase of 5.2 percent, 3.8 percent and 0.4 percent year-on-year in May, respectively.

All the three data collection authorities registered decrease in production in July-May FY2020 over the preceding fiscal year. Ministry of industries, measuring output trend of 36 items, recorded a 7.85 percent decline in production. Oil Companies Advisory Council, logging outputs of 11 oil and petroleum products, measured 1.26 percent year-on-year fall in outputs during the period under review. Provincial bureau of statistics, counting production of 65 products, logged 1.2 percent negative growth.