KARACHI: Not withstanding robust agriculture growth and a moderate recovery in LSM during the second quarter of FY24, services sector grew by only 0.5 percent in the first half of FY24 compared to 2.2 percent in same period last year.
According to the State of Pakistan’s Economy Report for the first half of FY24 released on Tuesday by the State Bank of Pakistan (SBP) the growth in services sector fell almost flat in the second quarter, after a modest recovery in the first quarter of FY24 from contractions in the preceding two quarters.
Performance within the services sector; however, remained mixed, the report said.
Wholesale and retail trade, real estate, transport and storage, hotels and restaurants and other private services recorded increased, while other major sub-sectors saw a decline.
Wholesale and retail trade services grew by 2.4 percent during the first half of FY24, in line with the recovery in agriculture and manufacturing. The improved performance is also supported by higher sales of non-financial firms.
Transport and storage services grew at a slower pace in the first half of FY24 compared to the same period last year. This slowdown can be associated with reduced use of air transport, and decline in sales of commercial vehicles and POL sales to transport sector.
Information and communication services showed contraction in the first half of FY24 compared to slight increase in the corresponding period of last year. This is despite 5.6 percent increase in broadband users during the first half of FY24.
Furthermore, internet and mobile banking transactions also continued to gain momentum, indicating the growing reliance on digital services. The decline in communication services is mainly explained by surge in sector prices in the second quarter of FY24. The deflator for the sector increased by 9.3 percent in the second quarter compared to the same period last year.
Finance and insurance services also contracted in the first half of FY24, continuing the trend for the fifth quarter. This can be due to lower credit to private sector and increase in deposits of banking industry, the report said.
Likewise, general government services fell further in the first half of FY24, whereas, real estate activities and accommodation and food service activities retained their growth, the report added.
Copyright Business Recorder, 2024