Acute energy shortage, especially gas, and the prevailing political uncertainty have hampered manufacturing productive activity in the country, said the State Bank of Pakistan in its second quarterly report on economy on Friday. According to SBP, large-scale manufacturing (LSM) production registered positive growth from December 2010 onwards for the first time in four months. Improvement in automobiles and sugar mainly contributed to LSM recovery.
However, many industries continue to face operational constraints which have hampered production in recent months and most notably gas supply shortages have affected the value-added textiles, fertilisers and chemicals sectors, which are vital towards sustaining the improvement in LSM performance.
It is expected that revival in the commodity producing sector will also support growth in the services sector through the remaining months of current fiscal year. Activity in transport, storage and communication may dampen in response to higher prices for high-speed diesel (HSD). However, this will be more than offset by an increase in demand for services due to record wheat production and countrywide rehabilitation efforts after the floods.
"Due to gas shortage, fertiliser sector has been particularly affected because of inadequate gas supplies, while some textile units have been forced to suspend operations because of insufficient energy", the report said. As the country moves into summer, the power shortage is likely to get worse, while the gas situation should improve as household use for heating eases, the report added.
Going forwards, some of the key risks to real sector performance originate from persistent energy shortages, rising prices for oil and industrial inputs as well as further reductions in development spending due to fiscal constraint, the report said.
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