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Pakistan’s economic turnaround attributed to improved business confidence: Report

According to the Policy Think Tank's 12-Month analysis till January 2021, the economy is going in a positive direction on the back of the Large Scale Manufacturing sector and Increased business confidence.

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Policy Research Institute of Market Economy (PRIME) on Friday released its monthly review of Pakistan’s macroeconomy covering different economic indicators including industrial production, trade volume, price levels, and private sector lending.

To analyze the above-mentioned indicators the variables taken from SBP and PBS are Trade Volume, Consumer Price Index (CPI), Quantum Index of Large-Scale Manufacturing Industries (QIM) & Long-Term Financing Facility (LTFF).

The data ranges from February 2020 to January 2021 shows that despite the 3rd wave of the ongoing coronavirus pandemic, Pakistan Prosperity Index shows an upward trajectory reaching an all-time high of 126.1 points in January 2021.PRIME report PPI

The report states that the economy is signaling an “economic turnaround largely driven by improved business confidence”. It shows that after a seven-month decline in the purchasing power triggered by the onset of pandemic leading to the closing of the business and internal and external trade restrictions, in December the purchasing power saw an increase followed by January 2021.

Read More: Large scale industry grows 7.45pc in February

Purchasing power went down from 93 in April last year to the lowest point of 85.6 in November, when it turned around and reached 86.4 in January 2021. However, the graph would have gone down again as February saw an increase in CPI for 1.8 percent from January, and the latest data for March by PBS shows that the inflation increased again month-on-month by 0.36 percent.

For the month of March, the inflation rate has been 9.1 percent YoY, according to the Pakistan Bureau of Statistics.

According to the report the Large-Scale Manufacturing Index (LSMI) also improved to 131.2 points in January of 2021 as the output of large manufacturers grew by 9.13 percent Year-on-Year. According to the latest PBS data, the output increases 4.85 percent YoY in February 2021, compared to February 2020, however, it decreased 4.15 percent, MoM, compared to January 2021.

According to the report, the Year-on-Year growth that represents the industrial revival is strengthened by the recently approved Electricity Support Package for industries and extension in tax amnesty scheme.

The report mentioned that country’s trade volume took a downward turn in January 2021 reaching Rs1.12 trillion, after increasing continuously for three preceding months.

Lastly, the report showed using the Private Sector Lending Index that the private borrowing from commercial banks has gone up owing to, “a subsidized borrowing rate coupled with the restoration of business confidence.” LTFF in January posted a borrowing of Rs294.9 billion in January 2021.

The report states, “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 More: Pakistan’s trade deficit increases 20.05pc as imports rise in March

The fact that economic indicators have shown a downward trend in February and March may point to a different picture, but in comparison with the last year, the Pakistan’s Economy has taken an upwards turn according to the Prosperity Index.

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