Exports growth on last legs

Pakistan’s exports for 9MFY20 grew by 2.2 percent year-on-year. Take screenshots. For it may be long before growth and exports are clubbed together in Pakistan’s context. Stories of textile orders being either cancelled or put on hold are aplenty. The numbers for April will be low, but it won’t be the bottom, as the true reflection of the pandemic on exports, will take another 2-3 months to reflect fully.

All of this is happening, when exports had finally started to show signs of resurgence. The quantity and quality of exports growth was being flaunted as a major success – and rightly so. Pakistan had been able to grow in markets where demand had gone down. Pakistan’s share in the major textile markets – EU and USA – had grown, both in quantity and value terms. Pakistan was making inroads in clinching better market shares, at the expense of China and even Vietnam.

The market-based exchange rate regime was helping too. The almost unprecedented support package to the export sector was finally starting to make a difference. The utility prices were at a steep discount from a year ago, and at par with regional competitors such as Bangladesh, Cambodia and India. Rebates were being settled rather smoothly. GSP Plus was making more sense. The big players had even started building more capacity, as questions were raise on Pakistan’s ability to meet the demand, as the exports became more competitive.

And then came the virus. No one knows how long it will last. The quantum of impact it is going to have on people’s purchasing power and more importantly consumption priorities remains unknown. But the direction is surely known. Even if the pandemic is nearing an end, it is believed to already have pushed the world into a great recession, and that will have consequences on consumption.

Could Pakistan still fare better than others if it opens up faster is up for debate. There could be a possibility of Pakistan feasting on with a better market share in a smaller pie. The home textile segment of towels and bed sheets may be the worst hit as hospitality if widely believed to be the last sector to regain any sense of normalcy.

Food consumption may still be the least impacted across the globe, but Pakistan’s food exports have remained rather sticky – and with limited upside potential in the major categories. Things may not be all that bad in terms of balance of payment, as demand compression at home also means significantly lower imports. But this is some setback to exports. One hopes the big players come out of it stronger.