Pakistan Prosperity Index up 13pc as businesses pick up

ISLAMABAD: After falling in April and May 2021, Pakistan Prosperity Index (PPI) hit an all-time high of 135.9 in June, driven by post-lockdown turnaround in commercial activities, a study showed on Thursday.

According to a latest report released by Policy Research Institute of Market Economy (PRIME), PPI increased 12.8 percent on account of a marked improvement in the business activities around the country.

PPI is an agglomeration of trade volume, lending to the private sector, purchasing power and manufacturing output indices.

The trade volume increased Rs548 billion year-on-year (YoY) and Rs360 billion month-on-month (MoM) with the resumption of business activities and reopening of international markets.

Private sector borrowing from banks has been on an upward trajectory owing to subsidised borrowing rate, while, long-term financing facility stood at an all-time high of Rs390.8 billion in June 2021.

In the context of purchasing power, the YoY inflation was reported at 9.7 percent, while the MoM one clocked in at a negative 0.3 percent, a manifestation of improvement in purchasing power. The prevalent high levels of inflation are mostly because of hike in food and energy prices.

Large Scale Manufacturing (LSM) increased by 4.36 percent MoM. This increase can be attributed to the higher demand emanating from ease in lockdown, mass vaccination and opening up of business.

In addition, higher production cost fueled by higher energy prices, and supply side disruptions of raw material all had a fair share in restricting LSM’s output. Notwithstanding, the overall economic outlook, as measured by PPI, seems to be encouraging.

The performance of economy indicated by PPI is consistent with the latest Business Confidence Survey 2021 by Overseas Investors Chamber of Commerce and Industry (OICCI), which also illustrated the strengthening of business confidence and augmented growth prospects owing to an uptick in the business activities.

With the ease in lockdown restrictions and a mass vaccination drive, overall state of the economy appeared encouraging and on a right track, the PRIME report said.

It said, however, there was still a need to curb the inflationary pressure, as this would not only improve the purchasing power/real incomes but also reduce the input cost of LSM.

The study stressed that addressing the supply side shocks of basic food items was pertinent to lower food inflation, which was the main cause of rising overall inflation in the economy.

These supply side shocks called for more liberal trade measures and elimination of state intervention in the market, the report added.