In an alarming development, the large-scale manufacturing (LSM) sector — which accounts for almost one-fifth of the country’s economic growth — contracted for the eighth consecutive month.
The pace of contraction sharpened to 11.59% in February compared to the same month of last year, data released by the Pakistan Bureau of Statistics (PBS) showed.
This decline is a significant concern for the country’s economy because of the LSM sector’s dismal performance, the gross domestic product (GDP) growth will also suffer a significant blow this fiscal year.
Industrial output witnessed a decline of 5.56% in the first eight months (July-February) of the ongoing fiscal year 2022-23 compared to the same period of the last financial year. Over the previous month (January), LSM output went down by 0.5%.
Both domestic and global factors have contributed to this decline, including high energy costs, rupee devaluation, and the government’s tightening of monetary and fiscal policies. These factors have limited imports due to a lack of dollars, contributing to the negative growth of the sector.
The global economic slowdown has added to the woes of industries in Pakistan, with many businesses scaling back operations or reducing operating hours, while others have shut down their plants. Ongoing economic and political instability in Pakistan has also been linked to the decrease in industrial output by independent political economists.
Uncertainty in the country has led to a decrease in investor confidence, resulting in a slowdown in manufacturing activities as well.
Moreover, the government’s inability to provide a stable and conducive environment for businesses has further worsened the situation, with investors hesitant to make long-term investments in the country. Combined, these factors have contributed to the ongoing nosedive of the LSM sector, which could impact Pakistan’s overall economic growth.
The LSM sector has witnessed a decline in production from August 2022 to February 2023, the breakdown shows:
- 0.02% decline in August,
- 2.7% decline in September,
- 7.63% decline in October,
- 6.15% drop in November,
- 3.51% decrease in December,
- 7.9% contraction in January 2023.
- 11.59% decline in February
All major and small sectors’ output contracted in February, including textile, food, coke and petroleum products, chemicals, automobile, pharmaceuticals, cement, fertilisers, iron and steel, furniture, leather products, electrical equipment, and non-metallic mineral products.
