Islamabad, November 21, 2023 (PAKONOMY): In a notable shift, Pakistan’s industrial sector faced a downturn, contracting by 2.9% in the fiscal year concluding on June 30, 2023. This downturn, a departure from the robust growth seen in the past, has raised concerns about the economic dynamics of the country.
Manufacturing Sector Takes a Hit
The manufacturing sector, a crucial driver of industrial activity, experienced a significant decline of 3.9% in FY23. This marks a stark reversal from the impressive 10.9% growth observed the previous year. Large Scale Manufacturing (LSM) output contraction, attributed to supply chain disruptions and weakened demand, played a pivotal role in this economic setback.
Challenges in Construction Sector
Simultaneously, the construction sector witnessed a substantial 5.5% decline in FY23. Rising labor and material costs, heightened borrowing expenses, and a slowdown in development spending contributed to the limitations in construction activity.
Impact on Related Industries
The industry’s challenges extended to the mining and quarrying sectors, constituting 9% of the industrial domain, which contracted by 4.4% in FY23. Factors such as reduced production of vital minerals, including natural gas, gypsum, sulfur, and crude oil, were primary contributors to this contraction.
Energy Sector Dynamics
Conversely, the value addition by the power, gas, and water delivery sector increased by 6% during FY23, despite a notable slowdown in gas and electricity production. Power subsidies, encompassed in gross value addition, were the primary driver of this increase. Reduced energy generation can be attributed to various factors, including economic downturn, increased electricity tariffs reducing demand, and challenges faced by certain power plants in coal importation.
Expert Insights
Dr. Javed, a senior economist at the Ministry of Planning, Development and Special Initiatives, expressed concern over the industrial contraction in FY23, emphasizing the vulnerability of the manufacturing sector. He called for a comprehensive strategy to enhance supply chain resilience, stimulate domestic demand, and address susceptibility to external shocks.
The 5.5% contraction in the construction industry raised red flags about the broader economic landscape, according to Dr. Javed. He stressed the need for a targeted approach to streamline bureaucratic processes, encourage investment, and create a conducive environment for sustainable growth.