LAHORE: The value of Pakistani exports has not changed dramatically during the pandemic so far, falling global demand has the potential to hurt future Pakistani exports.
This was according to a survey conducted in June this year by the Lahore School of Economics which covered first three months of the pandemic ie March-May 2020. The sample size for the survey was 130 companies of Lahore, Karachi, Sialkot and Faisalabad from textile, sports goods and surgical instrument sectors.
Dean of Economics Lahore School of Economics Dr Azam Chaudhry said that the coronavirus pandemic has led to negative economic consequences in most countries and Pakistan is no exception. He also said that survey has found that firms did not report significant changes in the value of their exports which is a promising sign for Pakistan's economy. Decreased demand and decreased export volume is a concern, though at the moment this has been balanced by higher prices of exported goods.
Azam further said that there is a room for improvement in terms of the support the government can offer to exporters during this turbulent time, though exporters were generally satisfied. But it is important to note that exporters were weary of further currency depreciation. Nonetheless, the future of Pakistani exports is not only dependent on how the pandemic impacts Pakistan, but how the pandemic impacts the export destination countries as well.
According to the survey export values did not change for a majority of respondents during the pandemic, with 58% of exporting firms reporting no change in their export value over the last three months. However, export volumes have fallen overall dramatically because of the global pandemic with 75% of firms reporting a fall in their export volumes. This relative stability in export values, with falling export volumes, was the result of an increase in average price with 26% of firms reporting an increase in the average price per unit of their exported good during the pandemic.
The majority of the firms in the survey reported that the value of their exports remained constant. Decomposing this result by size, we see that almost two-thirds of the medium sized firms and about half of both small and large firms reported that their export values did not change during this three-month period. At the same time, there were still firms that reported a decrease in export values: almost 14% of small firms, 11% of medium firms and 16% of large firms reported a decrease in export values. Some firms were able to take advantage of changes in demand and increase the value of their exports: 8% of small firms, 22% of medium-sized firms and 29% of large firms reported an increase in export value from March to May 2020.
What is especially interesting is that while a significant number of firms reported that their export values stayed relatively constant, but there were still significant changes in export volumes. In particular, 82% of medium sized firms reported that their export volumes fell, while both small and large firms reported 74% declines in their export volumes. Finally, there were firms that were forced to stop exporting over the three-month period; this was a particular problem for small exporters where almost 30% of small exporting firms were forced to stop exporting altogether during this three-month period. The survey showed that these seemingly conflicting narratives make sense because average prices of export goods rose while the export volumes fell which led to relatively constant total export values. The survey found that the average price per unit of the exported product rose for small, medium and large sized firms by 25%, 30% and 22.5%, respectively.
Across sectors, most firms reported stagnant export values. There were also firms from all three sectors who reported increases in their export values: surgical good producers experienced the greatest increase in export value with almost 37% of surgical producers reporting an increase in export value. The surgical goods sector experienced the greatest fall in export volumes but this was matched by the largest increase in average unit price: 53% of surgical exports reported an increase in average price per unit of the exports while sports goods manufacturers and textile manufacturers reported average unit price increases of 37.5% and 22.2% respectively. At the same time, almost 7% of textile exporters who responded reported that they were forced to shut down.
Eighty-two percent of firms surveyed reported lower demand for their products due to the pandemic. This fall in demand has had had the greatest impact on the sports goods sector, with almost 88% reporting a decrease in demand for their products. The textile exporters reported an 83% decrease in demand while the surgical exporters reported a 66% fall in demand for their goods. However, the textile sector has been relatively proactive with 19% of textile exporters switching their production to new products; these new products were mostly Covid-19 related and comprised PPE goods and masks.
Copyright Business Recorder, 2020