AIRLINK 74.00 Decreased By ▼ -0.56 (-0.75%)
BOP 5.02 Decreased By ▼ -0.04 (-0.79%)
CNERGY 4.42 Decreased By ▼ -0.04 (-0.9%)
DFML 39.20 Decreased By ▼ -0.53 (-1.33%)
DGKC 86.09 Decreased By ▼ -1.46 (-1.67%)
FCCL 21.65 Decreased By ▼ -0.28 (-1.28%)
FFBL 34.01 Decreased By ▼ -0.58 (-1.68%)
FFL 9.92 Increased By ▲ 0.17 (1.74%)
GGL 10.56 Increased By ▲ 0.07 (0.67%)
HBL 113.89 Increased By ▲ 0.10 (0.09%)
HUBC 135.84 Decreased By ▼ -0.68 (-0.5%)
HUMNL 11.90 Increased By ▲ 1.00 (9.17%)
KEL 4.84 Increased By ▲ 0.17 (3.64%)
KOSM 4.53 Decreased By ▼ -0.11 (-2.37%)
MLCF 38.27 Decreased By ▼ -0.19 (-0.49%)
OGDC 134.85 Decreased By ▼ -1.29 (-0.95%)
PAEL 26.35 Decreased By ▼ -0.26 (-0.98%)
PIAA 20.80 Decreased By ▼ -1.69 (-7.51%)
PIBTL 6.68 Increased By ▲ 0.01 (0.15%)
PPL 123.00 Increased By ▲ 0.71 (0.58%)
PRL 26.69 Decreased By ▼ -0.28 (-1.04%)
PTC 14.33 Increased By ▲ 0.42 (3.02%)
SEARL 59.12 Decreased By ▼ -0.75 (-1.25%)
SNGP 69.50 Decreased By ▼ -0.56 (-0.8%)
SSGC 10.33 Decreased By ▼ -0.02 (-0.19%)
TELE 8.50 Decreased By ▼ -0.04 (-0.47%)
TPLP 11.23 Decreased By ▼ -0.11 (-0.97%)
TRG 64.85 Decreased By ▼ -1.15 (-1.74%)
UNITY 26.25 Decreased By ▼ -0.08 (-0.3%)
WTL 1.34 Decreased By ▼ -0.01 (-0.74%)
BR100 7,851 Increased By 26.3 (0.34%)
BR30 25,337 Decreased By -69.2 (-0.27%)
KSE100 75,207 Increased By 122.8 (0.16%)
KSE30 24,143 Increased By 49.1 (0.2%)

Large Scale Manufacturing (LSM) has made headlines again; people are talking about how it is the first ever contraction in the last 10 years. That perspective cannot be disputed, as is quite evident from the illustration here. But is that really a surprise?

As early as July 2018 when the fiscal year 2019 just began, signs of a looming manufacturing recession were already in. When BR Research interviewed Dr Ehtisham Ahmad, senior fellow at the LSE and Pakistan’s Senior Advisor to the IMF Executive Board in 2008, he explicitly said: “Pakistan is in an economic crisis of unparallel proportions; and is in a position worse than in 2008”. (For details, read his interview in this paper’s Brief Recording section August 6, 2018)

Even brokerage houses that generally have a bullish bias towards forecasts had a sense of impending doom. For example, brokerage JS Global wrote in its CY19 equities strategy report: “make no mistake that we are economically worse off now than during the previous two IMF entry points (2008 and 2013) and our external funding plague will continue to infect our monetary and fiscal policies in 2019”.

By this comparison, therefore, it could be argued that Pakistan manufacturing sector in FY19 did better than what was previously feared. In FY09 – when Pakistan entered into the IMF programme – the country’s LSM growth had contracted by 6.04 percent. In contrast, FY19’s contraction is much lower, although admittedly the final number released next year will be a few points lower than what’s been provisionally released this week.

The real question is what’s going to happen in FY20. At the one end, fiscal constraints have led to reduced public sector development spending, where CPEC related expenditure has also tapered off, while private sector is grappling with low demand owing to high inflation amid higher interest rates.

Yet on the other hand, rationalization of exchange rate has started to offer green shoots towards domestic production as individual and business buyers are starting to switch towards locally produced products – the launch of Kia smack in the middle of high auto inventory season is also promising. (Read also Micro silver linings in macro abyss https://www.brecorder.com/2019/08/21/518905/micro-silver-linings-in-macro-abyss/published August 21 2019).

In between ifs and buts, it would not come as a surprise if the PTI starts working aggressively towards the re-launch of GDP and CPI with revised base years. Both matters have been long pending, and launched before June 2020, it may serve as a statistical distraction by slightly altering the discourse.

Copyright Business Recorder, 2019

Comments

Comments are closed.