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Business & Finance

Despite Covid-19, Pakistan’s economy struggling less than regional countries: Report

  • Despite the third peak of Covid-19, over a 12-month period PPI faces an upward-sloping trajectory reaching an all-time high of 126.1 points in January 2021 from 125.3 points in December 2020, signaling an economic turnaround largely driven by improved business confidence.
17 Apr 2021

Despite the financial and business uncertainties of coronavirus-induced economic slowdown persists globally, Pakistan’s economy appears to be struggling less relative to its regional counterparts with key economic indicators on the rise, revealed a report by PRIME, a public policy research organization.

As per PRIME’s latest Pakistan Prosperity Index (PPI), despite the third peak of Covid-19, over a 12-month period PPI faces an upward-sloping trajectory reaching an all-time high of 126.1 points in January 2021 from 125.3 points in December 2020, signaling an economic turnaround largely driven by improved business confidence.

The Pakistan Prosperity Index is calculated utilizing data from the Pakistan Bureau of Statistics (PBS) and State Bank of Pakistan (SBP) on monthly basis. The analysis is contingent upon the growth rates of four macroeconomic indicators of prosperity i.e. Trade Volume, Consumer Price Index (CPI), Quantum Index of Large-Scale Manufacturing Industries (QIM) & Long-Term Financing Facility (LTFF).

As per the report, the Purchasing Power Index also improved although slightly to 86.4 points in January 2021, as compared to 86.2 points in December 2020, due to Y-o-Y inflation further eases in January 2021 hovering at 5.7 percent. A decrease in the prices of basic food items contributed to the decelerating inflationary pressure.

The Large Scale Manufacturing Index (LSMI) also improved to 131.2 points as the output of large-scale manufacturing grew by 9.13 percent Y-o-Y in January 2021. “This industrial revival has been strengthened by a recently approved Electricity Support Package for industries and extension in tax amnesty scheme,” stated the report.

Whereas, private sector borrowing from banks has been on the rise owing to a subsidized borrowing rate coupled with the restoration of business confidence. Long-term financing facility stood at an all-time high of Rs. 294.9 billion in January 2021, the report stated.

“Despite the third wave of Covid-19 and a slide in trade volume, sustained growth of large-scale manufacturing, increase in private sector credit coupled with decelerating inflationary pressure has sustained the increase in economic prosperity during January 2021,” read the report.