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Pakistan’s trade volume will further shrink, predicts PRIME

  • April 02, 2020

ISLAMABAD-An independent economic think-tank, Policy Research Institute of Market Economy (PRIME) has projected Pakistan’s future economic situation as less glossy amid the coronavirus pandemic.

“Future is less glossy. It is projected that amid the coronavirus pandemic, Pakistan’s trade volume will further shrink as a result of the slowdown in global demand. The production of Large-Scale Manufacturing Industries will also be adversely affected due to lockdown,” the PRIME said in its ‘Pakistan Prosperity Report (PPR)’. The report, however, said commercial banks’ lending to private sector for long term fixed investment might increase with the hopes to stimulate export-oriented sectors.

It has also projected inflation would remain high hovering around 13 percent due to decrease in domestic production and shortage of essential commodities. Low purchasing power, fear of losing jobs and low returns on investments upholds the bearish sentiments among the stakeholders of the economy in the coming months.

Pakistan Prosperity Report (PPR) is a monthly review of Pakistan’s macro-economy based on the analysis of four periodic data sets- industrial production, trade volume, price levels, and private sector lending. The concept behind this report is intuitive- higher level of industrial output, increases in trade volumes, more lending to the private sector and an improvement in purchasing power of individuals are indicators of a strong economy, signaling prosperity of both firms and households.

The analysis in PPR (March 2020) is based on the data for December 2019 and January 2020. For a long- term view, data for the period of June 2019-December 2019 is separately covered.

The report first provides a general overview of macro-economy and then provides a snapshot of its first month-to-month growth in the prosperity. The report concludes that over the second half of the FY 2019, Pakistan witnessed overall improvement in the prosperity based on an increase in both large scale manufacturing and investment in the private sector, though decreasing purchasing power and trade volumes resulted in headwinds. For the first month-to-month comparison, between December 2019 and January 2019, the report finds that Pakistan continued to exhibit improvement in prosperity indicators.

The analysis reveals that economy’s prosperity has increased by 1.48 percent in January 2020 relative to December 2019 while experiencing an overall increase since June 2019. This increase in economic prosperity is largely attributable to an increase in long term financing facility, LSMI’s output and trade volume between December 2019 and January 2020. It is pertinent to note that the purchasing power has decreased implying that the increase in inflation may surpass monetary gains (income) from expansion in industrial output and trade volume.

For January 2020, the month-on-month inflation rate increased by 2%, while trade volume index, quantum index of Large-Scale Manufacturing Industries and Long-Term Financing Facility increased by 1.22%, 7.09% and 1.86% respectively. Low purchasing power, fear of losing jobs and low returns on investments upholds the bearish sentiments among the stakeholders of the economy in the coming months.

Article source: https://nation.com.pk/03-Apr-2020/pakistan-s-trade-volume-will-further-shrink-predicts-prime

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