Amid improvement in business activity, the Pakistan Prosperity Index (PPI) reached an all-time high of 135.9 in June 2021, an increase of 12.8% after the decline in April and May 2021, said Policy Research Institute of Market Economy (PRIME), an Islamabad-based think tank, in its latest report.

This figure signals an increase in economic prosperity at the back of higher business confidence and activity amid the fourth wave of Covid-19, added the institute.

PPI is an agglomeration of trade volume, lending to the private sector, purchasing power, and manufacturing output indices. The trade volume witnessed an increase of Rs548 billion Year on Year (YoY) and Rs360 billion Month on Month (MoM) on account of resumption of business activities and opening up of international markets.

Private sector borrowing from banks showed a surge of Rs170 billion YoY and Rs25 billion MoM increase. This increasing trend can be credited to lower cost of borrowing and a reduction in the budget deficit, which has reduced the government’s borrowing needs from the commercial banks thus reducing the crowding out effect.

In the context of purchasing power, the YoY Inflation was reported at 9.7%, while the MoM inflation clocked at negative 0.3%, a manifestation of improvement in purchasing power. The prevalent high levels of inflation are at the back of hike in food and energy prices.

Large Scale Manufacturing (LSM) increased by 4.36% MoM. “This increase can be attributed to the higher demand emanating from ease in lockdown, mass vaccination and opening up of business. In addition, higher production cost fueled by higher energy prices, and supply side disruptions of raw material all had a fair share in restricting LSM’s output. Notwithstanding, the overall economic outlook, as measured by PPI, seems to be encouraging,” added the report.

OICCI survey reveals 'record improvement' in business confidence

PRIME said that with the ease in lockdown restrictions and a mass vaccination drive, overall state of the economy seems encouraging and on the right track. However, there is still a need to curb inflationary pressures, as this will not only improve the purchasing power/real incomes but also reduce the input cost of LSM.

“Addressing the supply side shocks of basic food items is pertinent to lower food inflation, which is the main cause of rising overall inflation in the economy. These supply side shocks call for more liberal trade measures and elimination of state intervention in the market,” it said.

Days ago, the Overseas Investors Chamber of Commerce and Industry (OICCI) shared the results of its comprehensive Business Confidence Index (BCI) Survey - Wave 20, which revealed that the overall Business Confidence Score (BCS) in Pakistan now stands at positive score of 9%, a record improvement by 59 percentage points from the previous negative 50% score in Wave 19 Survey conducted in May 2020.