Better performance: Large-scale manufacturers post impressive figures

Pakistan’s GDP growth will remain in the range of 3 to 4% in FY14, which is higher than the IMF’s growth forecast of 2.5 to 3.0%. PHOTO: FI LE

KARACHI: 

The large scale manufacturing industry (LSM) has performed better than expected in the first five months of the current fiscal year, indicating that the country is likely to achieve a better growth rate this year, according to economic experts.

Recently recorded data reveals that the LSM sector has posted an impressive 5.23% growth from July to November 2013, pointing towards a strong manufacturing output by year-end.

“Strong growth in the LSM sector shows that Pakistan’s manufacturing sector is going to strongly support the country’s GDP growth in the current fiscal year,” stated Zia Abbas, a lecturer for Applied Economics Research Centre (AERC) at the University of Karachi.

Pakistan’s manufacturing sector constitutes 20.9% of the country’s GDP while LSM has a strong 10.6% share.

Experts believe that there are various reasons as to why activities in large industrial manufacturing have jumped in the last few months. They state that better energy supply, decline in international commodity prices, low-base year and strong investors’ confidence in the government policies have all played an important role in rebounding the LSM growth.

“If the government continuously manages the economy in this manner, the country can touch 4% GDP growth in fiscal year 2014 (FY14),” Abbas said, adding that this growth also shows that the government has helped investors shed their fears they had owing to poor economic performance of the previous government.

Pakistan’s economy grew at 3.6% in the last fiscal year ending on June 30, 2013. According to the State Bank of Pakistan’s prediction, Pakistan’s GDP growth will remain in the range of 3 4% in FY14, which is higher than the IMF’s growth forecast of 2.5 3.0%.

However, the government’s target is above the two, as it is eyeing a strong 4.4% growth in this period.

With a weight of 10.6% in the GDP, LSM’s growth of 5% in FY14 (against 2.8% growth in FY13) carries the potential to lift Pakistan’s GDP growth to over 4% in FY14, compared to 3.6% in FY13, according to a report by Topline Securities.

Owing to the energy situation and business-friendly policies of the new government, the LSM growth is far better than the 1% average growth in the previous government’s last five years, the report said.

“Looking at this trend and expected improvement in Pakistan’s largest textile sector after receiving the GSP Plus status, the LSM growth in FY14 may reach close to 5%” the report added.

Analysts believe that one of the major reasons for low economic growth during the last five years was the below-average performance by the manufacturing sector of the country. But since the government is targeting foreign investors and continuously giving incentives, it will increase both local and foreign investor’s confidence in the country’s economy.

Supporting Abbas’ point of view, Managing Director for Emerging Economics Research Muzammil Aslam said, “If the government continues to produce more electricity in the coming months and if it also gets the support of better crops this year, the country can meet the GDP growth target of over 4% in FY14.”

The government has also improved the electricity supply by resolving the circular debt that strongly supported LSM and manufacturing growth in the first 5 months of FY14, he added