Industrial and services sectors: Activity picks up in 1HFY22

ISLAMABAD: During first half of financial year-2022 (1HFY22), industrial and services sectors’ activities picked up and the agriculture sector performance looked impressive as far as estimates of Kharif crops are concerned.

According to Mid-Year Economic Review (July-December 2021-22) report released by the Ministry of Planning, Development and Special Initiatives, agriculture sector outturns are likely to exceed its envisaged targets as Kharif crops are at final stage of harvesting and early output estimates of all three major crops are higher than for the comparable period of last year.

Cotton arrivals till 18th January 2022 were 34.4 percent higher than comparable period of FY21. However, as the pace of recent arrivals have slowed down, the initial estimates of 8.4 million bales output are unlikely to be realised but final output will still exceed the last year’s cotton output of 7.1 million bales.

The report further revealed that sugarcane production is estimated at 87.7 million tons from an area of 1.3 million hectares showing an increase of 8.7 percent and 8.2 percent in area and production, respectively, over the last year.

The rice production is estimated at 8.8 million tons from an area of 3.5 million hectares showing an increase of 5.8 percent and 5.0 percent in area and production, respectively, over the last year. The maize production for 2021-22 is estimated at 9.0 million tons from an area of 1.4 million hectares. All these output estimates are showing an improvement over June 2021 estimates.

Mid-Year Economic Review (July-December 2021-22) report added that wheat production target of 28.9 million tons from an area of 9.2 million hectares has been set by the Federal Committee on Agriculture (FCA) in October.

2021: Performance of agri sector described as ‘satisfactory’

Support price, favorable weather conditions and timely availability of quality inputs would be vital to achieve this increased production target by 5.9 percent over the actual last year’s output of 27.3 million tons. The ongoing short supplies of fertilisers and irrigation water/less rains during Rabi 2021-22 will be the major limiting factors to achieve wheat output target.

The Annual Plan for 2021-22 envisaged GDP growth at 4.8 percent based upon contributions from agriculture (3.5 percent), industry (6.5 percent), and services (4.7 percent).

The report further said that during 1HFY22, industrial is evident from an increase of 71.2 percent in car sales during 1HFY22 to 114,765 units in comparison with the same period of last year.

Despite monetary tightening, auto financing is up by 34percent, credit card spending is up by 26percent, housing finance by 72percent, and personal loans by 72percent in January 2022 over January 2021, which reflects immense demand pressures in the economy.

The SECP registered companies posted highest ever increase in profitability in almost a decade during 1QFY22 and new registered companies grew by 44 percent in 1QFY22.

In January 2022 projections, the IMF has revised down economic growth for advanced economies from five percent in 2021 to 3.9percent in 2022 and for emerging and developing Asia from 7.2percent in 2021 to 5.9percent in 2022.

According to the report, international crude oil prices during January 2022 are already scaling 7-year high level. In this backdrop, it is not surprising that inflationary pressures mounted in the economy and the government has to adopt demand management tools to counter inflation.

According to the report, debt servicing was expected to be lower owing mainly to benign interest rate environment, and being the single largest fiscal expenditure item, was expected to favourably contribute towards fiscal consolidation efforts. Consequently, additional fiscal space that was so generated was deployed in the FY 22 federal budget towards 38percent rise in higher development expenditures (including Covid-related expenditures) and to slowdown the build-up of circular debt in the power sector.

About, economic performance during First Half of FY22, the report said that in pursuance of government’s agenda for promotion of agriculture sector, the State Bank of Pakistan (SBP) has assigned annual indicative agricultural credit disbursement target of Rs1,700 4 billion for FY22, which is 24.5percent higher than last year’s disbursement of Rs1,366 billion.

Copyright Business Recorder, 2022