“Economic outlook darkens as prosperity index drops 5pc”

ISLAMABAD: Pakistan Prosperity Index (PPI) fell 5.2 percent, revealing economy hit a bump amid rising inflation and falling industrial production, study finds Monday.

The study was published by the Policy Research Institute of Market Economy (PRIME), which publishes a monthly PPI report with a two-month lag depending on the availability of the required data, the current report includes data from August 2020 to July 2021. PPI is an agglomeration of trade volume, loans to the private sector, purchasing power and manufacturing production indices.

The gist of the report is that the overall economic outlook, as measured by the PPI, currently portrayed a downward trend and contrasted with the government’s growth agenda.

Economic performance has not been encouraging and has exposed several underlying issues, according to the report. Pakistan’s trade volume increased by 298 billion rupees year-on-year and decreased by 182 billion rupees month-on-month due to a decline in the value of the rupee against the dollar and higher prices. international commodity prices.

He said the depreciation of the rupee made necessary imports expensive, resulting in a higher cost for businesses and, as a result, lower manufacturing output.

Large-scale manufacturing (LSM) was down 4.91% month-on-month, due to the intermittent disruptions caused by the pandemic and the continuing surge in prices.

Out of 15 large-scale industries, 10 showed growth of less than 1%, the automotive industry showed growth of more than 2%, while four industries showed negative growth.

The prevailing high levels of inflation are due to rising food and energy prices and currency devaluation.

He added that there was an urgent need to curb inflationary pressure by increasing productivity and output, as this would not only improve purchasing power / real incomes, but also reduce the cost of LSM inputs.

In addition, purchasing power contracted as year-on-year inflation hit 8.4%, while it hit 1.3% month-on-month, an illustration of the decline in purchasing power. purchase. Instead of distorting markets through price controls, it is imperative to deal with shocks on the supply side of basic foodstuffs to reduce food inflation, which is the main cause of rising inflation. overall in the economy, according to the study.

Supply-side shocks call for more liberal trade measures and the elimination of state intervention in the market, the report advises.

The report stressed that careful economic planning was needed to ensure an uninterrupted supply of LNG (liquefied natural gas) to the manufacturing sector for higher efficiency.

Private sector borrowing from banks has shown a continuous increase of 177 billion rupees year-on-year and 17.8 billion rupees month-on-month. This is mainly due to the lower cost of borrowing and a reduction in the budget deficit, which reduced the government’s borrowing requirements from commercial banks, thus reducing the crowding-out effect.