Coronavirus spread: industrial output may take further hit.

Byline: S. Kamal Hayder Kazmi

The economists urged that nothing is safe from disruptions globally and various main companies are considering bringing back manufacturing facilities and seems less interested in economic integration. In Pakistan because of ongoing coronavirus spread, industrialists urged that the lockdown in the country poses a threat to their survival because of sluggish production and additional cost of paying wages to an unproductive workforce.

The industrial sector also urged it is now struggling to stay afloat amid the lockdown, with rising numbers of industrialists, already burdened with various taxes, higher utility charges and interest rates, expressing their inability to pay workers in May 2020. For the industrialists, the current lockdown has led to income erosion and further cost of doing business, as they have to pay salaries and arrange rations for idle workers and daily wage earners. No doubt the Pakistan's powerful business community was under pressure from the Government of Pakistan to ease the lockdown because of financial losses.

In spite of all these the State Bank of Pakistan (SBP) reported that there are glimpses of some enhancement in the output of the industrial sector in Q2-FY2020 over the previous quarter. Specifically, Large Scale Manufacturing (LSM) output's contraction decelerated abruptly during Q2-FY2020. It registered a meager rise of 0.02 percent (YoY) as against to fall of 5.7 percent in Q1-FY2020.

Automobile

Statistics released from SBP showed that this sector's output contracted 36.4 percent in H1-FY2020. This is a register low growth since the rebasing of LSM in FY2006. In addition, the automobile sector decelerated more in Q2-FY2020 as against to the preceding quarter. It is also reported that major contributor to this performance - because of its weight in LSM Index - was the passenger car segment. That said, output of other subsectors also dipped abruptly.

Focusing on LSM statistics for automobile sector, large rise in prices on account of exchange rate adjustment stayed the main cause for fall in demand for automobiles. This was partially the result of low level of localization of auto parts. Furthermore, the fall in output of the automobile sector can also be traced to fiscal consolidation and tight monetary policy in the country. New entrants have somewhat changed the dynamics of this sector.

Construction-allied industries

The officials of SBP also revealed that the output of the steel...