LSM shrinks 10.2 percent in FY2020

ISLAMABAD: Large scale manufacturing (LSM) contracted 10.2 percent during the last fiscal year, second annual negative growth in a row since the government took charge, as demand remained suppressed on lack of policy reforms.

Pakistan Bureau of Statistics (PBS) data on Wednesday showed that all the key economic sectors showed downtrend in the last fiscal 2019/20.

LSM showed a significant 16.8 percent growth in June over May due to easing lockdown related to coronavirus and base effect with manufacturing staying restricted since late March. The partial ease in lockdown from early June pushed the business ahead.

However, LSM output decreased 7.7 percent year-on-year in June, triggered by declining industrialisation across the board.

LSM growth target for FY20 was set at 3.1 percent. The output also moved in reverse direction of the FY2019’s target with big industry having dipped 2.3 percent as opposed to the annual target of 8.1 percent. The decline was the first contraction in a decade.

Dismal LSM growth was collectively dragging the economic growth to lower trajectory. Growth faltered to 0.4 percent last fiscal from 3.3 percent a year ago.

Analysts have been warning the government of de-industrialisation for two years.

Declining LSM dragged down overall growth of the industrial sector, according to the Planning Commission.

“The contraction may also be attributed to subdued demand owing to double digit inflation during the year and completion of first phase of CPEC which resulted in slowdown in infrastructure related investment,” the commission said the annual plan 2020/21 report. “On supply side, rupee devaluation, import duties and taxes levied in budget 2019/20 increased the cost of imported inputs especially in automobile, electronics and pharmaceutical sectors. The pandemic of COVID-19 also intensified economic miseries of the industrial sector in particular.”

All the three data collection authorities registered decrease in production last fiscal year. Ministry of industries, measuring output trend of 36 items, recorded a 7.43 percent decline in production. Provincial bureau of statistics, counting production of 65 products, logged 1.53 percent negative growth. Oil Companies Advisory Council, logging outputs of 11 oil and petroleum products, measured fall of 1.21 percent.

PBS data showed that sugar production fell 7.2 percent in FY2020. Steel output also showed double digit decline as construction industry couldn’t resume full-fledged operation due to unfulfilled commitments. Manufacturing of trucks, tractors, buses, cars and motorcycles declined year-over-year.

Production of diesel fell 40 percent year-over-year in FY2020, followed by solvant naptha (30.6pc), lubricant oil (29.3pc), jet fuel oil (29pc), kerosene oil (23pc), furnace oil (23pc), and motor spirits (13pc).