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Big industry production falls for the seventh consecutive month.

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In February, the rate of contraction quickens to 11.59%.

This reduction has been caused by forces on the domestic and international levels.

The economy of the nation is very concerned about the decline.

ISLAMABAD: The large-scale manufacturing (LSM) industry, which contributes approximately one-fifth of the nation’s economic growth, shrank for the eighth consecutive month, which is a worrying development.

 

According to data issued by the Pakistan Bureau of Statistics (PBS), the rate of contraction accelerated to 11.59% in February over the same month in 2017.

 

Due to the LSM sector’s poor performance, the gross domestic product (GDP) growth will also take a substantial hit this fiscal year, making this decrease a serious issue for the nation’s economy.

In the first eight months (July-February) of the current fiscal year 2022–23 compared to the same time in the previous financial year, industrial production decreased by 5.56%. LSM production decreased by 0.5% from the previous month (January) to this one.

This reduction has been caused by both internal and international reasons, such as increased energy prices, rupee depreciation, and the government’s tightening of monetary and fiscal policy. Due to these issues, imports have been constrained due to a scarcity of dollars, which has slowed the sector’s negative growth.

The difficulties faced by Pakistani industry have been made worse by the global economic slump. Many companies have scaled back operations or shortened their hours of operation, while others have shut down their units. Independent political economists have also connected Pakistan’s ongoing industrial output decline to the country’s ongoing political and economic unrest.

 

Investor confidence has fallen as a result of the country’s uncertainty, which has also caused a halt in manufacturing operations.

Investors are reluctant to make long-term investments in the nation as a result of the government’s incapacity to create a stable and business-friendly climate. These elements have combined to cause the LSM sector’s continued decline, which may have an effect on Pakistan’s overall economic expansion.

 

The analysis reveals that during August 2022 to February 2023, production in the LSM sector fell as follows:

  • 02% decline in August,
  • 7% decline in September,
  • 63% decline in October,
  • 15% drop in November,
  • 51% decrease in December,
  • 9% contraction in January 2023.
  • 59% decline in February

Including textile, food, coke and petroleum products, chemicals, automobiles, pharmaceuticals, cement, fertilisers, iron and steel, furniture, leather products, electrical equipment and non-metallic mineral products, all major and minor industries had decreased output in February.

 

The State Bank of Pakistan (SBP) increased the discount rate to 21% in order to battle the rising inflation, which was measured at 35.4% in March. The bank has increased the rate by three times, or 1,400 basis points, since July 2021 when inflation was at 7%, which has hampered industrial activity by making bank credit more expensive.

With major industries making up a sizeable share of the economy, Pakistan’s LSM sector expanded by 11.7% over FY21 in FY22 thanks to increased global demand and supportive government policies.

 

According to PBS statistics, the following industries had a sizable loss in February on an annual basis:

  • Textiles — 19.67%,
  • Pharmaceuticals — 25.47%,
  • Food — 2.43%,
  • Garments — 2.99%,
  • Non-metallic minerals — 1.33%,
  • Iron and steel — 9.19%,
  • Chemicals — 14% (of which chemical products output was up 2.96% while fertiliser was down 25%)
  • Football output — 17.3%
  • Machinery and equipment output — 28.45%,
  • Automobiles — 64%,
  • Computer, electronics, and optical products — 39.7%;
  • Furniture — 12.7%,
  • Cement — 3.4%,
  • Wood products —74.85%,
  • Tobacco — 10.6%,
  • Rubber products — 4.88%,
  • Coke and petroleum products — 6.35%,
  • Leather products — 1.6%,
  • Other transport equipment output — 31.2%,
  • Cotton cloth — 17.7%,
  • Cotton yarn by 30.1%

Only the production of wearing clothing (garments) has grown throughout the July–February fiscal year 2022–23 period of FY22 compared to that of FY22, with leather increasing by 3.85%, furniture increasing by 58.45%, and football increasing by 35.8%.

 

The following industries’ outputs decreased throughout the course of the first eight months of the current fiscal year:

  • Food output — 1.95%,
  • Beverages — 6.14%,
  • Tobacco — 20.4%,
  • Textiles — 14%,
  • Wood products — 68.65%,
  • Paper and board — 3.4%,
  • Coke and petroleum products — 9.4%,
  • Pharmaceuticals —22.4%,
  • Rubber products — 7.3%,
  • Non-metallic mineral products — 9.1%,
  • Computer, electronics, and optical products — 25%,
  • Machinery and equipment — 38.6%,
  • Automobiles — 38.6%.
  • Cement — 11.8%,
  • Iron and steel — 3.9%
  • Fabricated metal — 12.8%

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