Hope, not credit, needed to lift the economy

If credit is any guide, the recession may be easing in different times in different sectors. After having repaid their debt for the past many months, private borrowers took fresh loans in October for the first time since December 2008.
Central bank data show that private sector took new loans worth Rs47.66 billion in October, on a net basis, compared to an average repayment of Rs26.57 billion for each month between July-Sep. Thats a good sign indeed. But where is all that new money going.
Amongst the notable business borrowers are those involved in fields of electricity, gas and water supply, who took Rs11.5 billion worth of new loans in October versus an average repayment of Rs1.49 billion in the first quarter.
The biggest chunk, however, was taken by manufacturers who took more than half of fresh loans (about Rs28.9 billion) of which more than a third was borrowed by textile makers. Now that can be called an export led recovery; albeit, it could be seasonal impact because October typically sees higher loans due to cotton buying by spinners.
Data show that those occupied in commerce and trade - a sector which has about 11 percent of total outstanding loans - took Rs5.2 billion worth of new loans. Of this, loans for export was Rs2.8 billion, that for retail trade was Rs4.5 billion - both partially offset by a repayment of Rs2.13 billion by domestic wholesalers.
While credit to commerce industry may present an anomaly, the continuous decline in personal loans confirms that the consumer is indeed on a great retreat. And thats mostly because public perception about Pakistans future in 2010 paints a rather blue canvass.
About 36 percent of men and women polled by Gallup Pakistan believe economic condition of the country will worsen next year, while another 29 percent see the situation stagnant at current levels. Those hopeful constitute only 19 percent - a number that has halved from a similar poll released in September, when 38 percent had high hopes regarding their household financial position for the coming year.
This is quite possibly because of the growing security tensions, which has terrorized the hearts and minds of consumers. According to another poll by the same entity, about 80 percent fear even leaving their houses due to security threats - let alone making purchases.
History has proved that when the economy sags, the only thing thats puts it back on feet is hope, but if this is the sort of confidence an average consumer has then what hope have we.