EDITORIAL: Consumer Price index (CPI) declined to 1.4 percent in February prompting Prime Minister Shehbaz Sharif as well as his Information Minister to claim that the economy is not only on the path towards stability but its impact is now being felt at the grass root level.
Comparison with the comparable period of the year before is stark: 5.85 percent during the first eight months of the current year against 27.96 percent July-February last year.
Notwithstanding the usual data manipulation by the Pakistan Bureau of Statistics (PBS) largely by taking account of only subsidised rates — electricity and all essential items — rather than the average the trend of a decline cannot be denied.
The key question is whether this decline represents general well-being of the public. To answer this query it is relevant to take account of two other indicators released by the government: the large-scale manufacturing (LSM) sector registered negative 3.73 percent in December 2024 and cumulative negative 1.87 percent in July-December 2024 and growth was largely in non-productive sectors. Or, in other words, any decline in output with growth on the back of non-productive sectors implies that the well-being element of a decline in inflation is severely limited.
A decline in the productive sectors was acknowledged by the National Accounts Committee, which met on 31 December 2024 and approved a growth rate for the first quarter of the current year at 0.92 percent while downgrading the 2.52 percent growth estimated for 2023-24 to 2.50 percent. As per the PBS, the rate of contraction in industry has slowed down from 4.43 percent in 2023-24 first quarter to 1.03 percent in 2024-25 first quarter.
Mining and quarrying industry has contracted by 6.49 percent due to low quarterly production of mining products, e.g., coal (-12.4 percent), gas (-6.7 percent) and crude oil (-19.8 percent).
And it has also claimed that electricity, gas and water supply industry has posted a modest growth of 0.58 percent, with shortages felt at every level (household, industry and commercial enterprises) with cement registering negative 16.12 percent.
Services mainly retail and wholesale trade grew by 1.43 percent in the first quarter (against 2.16 percent in the same period last year) though it is relevant to note that trade consists of not only local manufactured goods but imports, legal and smuggled, as well.
Components of services sector also included accommodation and food services (4.58 percent), information and communication (5.09 percent), real estate activities (4.22 percent), education (2.03 percent), human health and social work activities (5.60 percent) and other private services (3.30 percent) — sub-items that anecdotal surveys reveal again and again have not improved the quality of life of the general public.
The second quarter growth rate is to be released by the end of March and hence it is premature to assess the growth rate for October to December 2024 at present. Be that as it may, there is evidence to suggest that the negativity in LSM may continue and the budgeted GDP of 3.5 percent for the year, with the range of 2.5 to 3.5 percent supported by the Monetary Policy Committee during its recent meeting, raises the spectre of a recession which is the natural outcome of the severely contractionary monetary and fiscal policies that have been in place in this country since 2019, with a two-year gap allowed by the International Monetary Fund (IMF) to help deal with the onset of the Covid-19 crisis.
Supporters of the government argue that the check on inflation is a measure of the success of the contractionary policies though they contend that it would have been preferable to keep the wheels of industry oiled, which would have generated employment opportunities; the low inflation rate together with high unemployment levels (22 percent as per the PBS’ recently uploaded digital population and housing survey) has raised poverty levels, which today are being estimated at 44 percent — higher by a couple of percentage points relative to Sub-Sahara Africa.
Copyright Business Recorder, 2025