With 6.8 percent growth in FY16, for the first time in past 12 years the industry surpassed the growth target set in the Annual Plan. According to State Bank of Pakistan, the growth in the industrial sector recovered sharply from 4.8 percent in FY15 to 6.8 percent in FY16. The achieved industrial growth in FY16 is even higher than target of 6.4 percent set under the annual plan.
This performance was encouraging given the continued uncertainty in the global economy and subdued external demand. While the recovery was broad-based, as all sub-sectors recorded higher growth over previous year, the major contribution came from large-scale manufacturing, construction and electricity generation & distribution and gas distribution, it added.
"In fact, this was the first time in past 12 years that the industry performed well and accordingly surpassed the growth target set in the Annual Plan," the SBP said in its recent report issued on economy.
The recovery in industry was particularly encouraging, as it was achieved despite sluggish external demand. The sector benefited from booming construction activities both in private and public sector improved gas availability to fertiliser plants and continued strong demand for automobiles. More importantly, the confidence of businesses also firmed up, as evident from the announcement of capacity expansion by some of the major companies in cement, automobile and dairy products, it added.
This sharp growth in industry also had spillover impact on the services sector as wholesale and retail trade (a heavyweight in services) rose sharply from 4.3 percent last year to 5.7 percent in FY16. In addition, general government services continued its growth momentum on the back of increase in salaries and pension of government employees, whereas finance and insurance posted a recovery on account of strong profitability of the banking sector.
According to the SBP, Large Scale Manufacturing (LSM) also continued its growth momentum in last quarter of FY16 as well, resulting in a cumulative growth of 4.7 percent during July-March FY16, compared to 2.8 percent during the same period last year.
Besides consumer durables and construction related industries, other manufacturers in fertiliser, steel (in private sector), rubber, pharmaceuticals and paints also contributed to the growth impetus. A number of factors helped the LSM achieve this performance, eg, continued low prices of key raw material, improved and affordable energy supply, and multi-decade low policy rate that led to higher credit flows to the private sector, it added.
The import of Liquefied Natural Gas (LNG) enabled the government to increase gas supply to Compressed Natural Gas (CNG) stations, fertiliser plants, textile industry and general industry (Source: Ministry of Petroleum). In addition, the fall in furnace oil prices brought down costs of own power generation for industries.
Sectoral wise performance of Automobiles showed that with an exceptional growth of 23.4 percent during July-March FY16, the automobile industry contributed more than one-fourth of the overall LSM growth.
Continued strong sale of car models introduced last year; availability of cheaper auto financing, extra demand under Apna Rozgar scheme, better law and order situation and increase in trading activities supported the automobile industry. In particular, passenger cars, trucks & busses and pick-ups registered significant growth in sales.
Fertiliser production recovered sharply from a meager 1.0 percent YoY growth during July-March FY15 to a strong 15.9 percent increase during July-March FY16. More importantly, this exceptional performance was realised despite a significant slowdown in local demand. The increase in production owes to improved gas availability due to LNG import and new exploration and development by Mari gas
Recovery in sugar and edible oil industries steered growth in the food sector. Within sugar, a better sugarcane crop this year explains 2.9 percent growth in July-March FY16, compared to a contraction of 6.1 percent during the corresponding period last year.
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