ISLAMABAD: Despite the devastation caused by floods of previous year and the constrained availability of energy, the economy has been showing distinct signs of recovery, according to Business Barometer released by the Pakistan Institute of Development Economics (PIDE) here Monday.
"The economy appears to have braved the devastating blow dealt by the unprecedented floods of August last and a sense of moderate optimism seems to have re-emerged despite the constrained availability of energy," the Business Barometer said.
However, the barometer warns that the consistent increase in the cost of production has the potential to tame this optimism.
This issue of the barometer covers the expectations of the firms for January-June after a survey conducted by a research team of PIDE in March 2011.
PIDE's Business Barometer, a biannual feature, captures the expectations of business enterprises regarding their business activity, prices faced and constraints encountered.
The view of distant economic recovery and its vulnerability emerged from responses of the firms regarding expected change in production and sales volume, capacity utilization, employment level, inventory level and prices of inputs.
The barometer finds that almost half of the firms posted a modest increase in their business volume during July-December 2010 and the firms also remain moderately optimistic about the growth in business volume during January-June.
Capacity utilization also shows changes that correspond to the growth in production and sales volume while prices of the final products of a large majority of the firms registered an increase of more than 10 percent primarily due to increase in the cost of production and the firms expect that the trend of increase in prices will continue during January-June.
Though the firms have indicated the availability of energy as a constraint to doing business still this does not seem to have significantly impacted the production volume at an aggregate level.
One reason could be that the energy constraint having become persistent,the firms have made some alternate arrangements like the use of generators and adjustment in working hours, it observes.
The alternate arrangements, of course, add to the cost of production and the firms also feel that weak demand and the high cost of capital are the other major constraints to doing business, the barometer added.
The conclusions drawn in the barometer are based on a randomly selected sample of firms, mainly manufacturing, listed at Karachi Stock Exchange. The full text of the barometer is available www.pide.org.pk.
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