This year’s LSM story is a little peculiar. Usually in economies like Pakistan where government institutions aren’t always independent and strong, controversies abound over the over-reporting of GDP figures. But this year around - in FY17 that is – there is a possibility that the government may have underestimated the full-year LSM growth numbers.
According to the GDP growth table released by National Economic Council (NEC), the GDP is forecast to grow 5.28 percent with large scale manufacturing (LSM) seen growing at 4.93 percent for the full year ending June 2017. (See BR Research column: Fair and square growth, published May 19, 2017). But here is the strange part.
The last available LSM numbers released by Pakistan Bureau Statistics is for the nine-months ending March 2017, which shows a growth of 5.06 percent. Based on this nine-month number, the government comes up with a forecast for full-year LSM growth number – a usual practice seen every year.
This column is not privy to the item-wise assumptions made by the government to come with the full-year LSM growth number. Such details aren’t shared, if prepared at all. However, if the difference between nine-month and full-year numbers as well as the historical LSM trends in the fourth quarter are any guide, the next three months (Apr to Jun) should be witnessing a month-on-month fall in LSM index.
The question is: by how much will the LSM fall in the next three months. If the LSM follows its 5-year average month-on-month decline in the next three months, the full-year LSM growth number should land at 8.05 percent. If it tracks the worst month-on-month movements in last five years, then full year LSM growth would end up at 5.97 percent. But if NEC’s full year LSM forecast is any guide, then brace yourself for a sharper than usual month-on-month LSM decline in the last quarter of this fiscal year.
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