April was tipped as the starting point of export revival by a few circles. April came and went. The exports refused to head north. The $2 billion in April 2019 was 1.5 percent lower year-on-year. The 10MFY19 exports are virtually at the same spot as 10FY18 at $19.1 billion. The criticism on exports sector lackluster response despite massive currency devaluation – seemed a bit overboard in the first place.
But then it was nobody else but the then Finance Minister Asad Umar who had predicted a revival of sorts form April onwards. One hopes ‘stagnant’ is not the new growth. In all fairness to the major export earners, capacity expansions are already underway, and the impact of lower energy prices, will only translate when additional capacities are up and running. The market is very competitive and the unit prices will more often than not adjust accordingly.
Digging deeper reveals it isn’t a lost cause yet. Expecting immediate recovery just because the currency has depreciated is naïve. What is heartening is that some inroads have been made in the textile exports without adding capacity.
The quantity exported in some high margin export categories such as readymade garments, knitwear and Basmati has increased considerably in double digits. Some of the textile export categories are all set to record the highest ever numbers in terms of quantity, with readymade garment exports having already achieved that, with two months remaining in the fiscal year end.
The graph shows that no major export category has grown both in terms of quantity and dollar unit terms together. The graph shows that most categories have witnessed a downturn in unit value, arresting the overall growth impact of quantity. In cases where unit value has increased, it has been offset by a similar magnitude decrease in quantity.
Pakistan’s export unit prices have historically been found moving in tandem with crude oil prices, than currency. Oil, having stayed bearish for an extended period, is now flexing muscles, and is inching north.
The major export markets EU and USA have not really shown very encouraging signs of a turnaround in the overall slowdown of demand, but Pakistan’s inherent cost advantage should be enough to cater for the existing demand, with added capacities in a year’s time. The currency’s fresh round of depreciation would mean further readjustment to unit prices. The impact of quantity, with crude oil movement, could potentially be more critical to assess where the exports are headed to.
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