Economy

Pakistan’s economy revs up as Covid-19 cases ease up

Bloomberg September 14 | Updated on September 14, 2020 Published on September 14, 2020

Analysts expect 5% growth this year, more than double the government target of 2.1%

 

Pakistan is showing signs of business activity picking up at a faster clip, as worries about new coronavirus infections fade in an economy that contracted for the first time in seven decades.

Evidence of momentum returning can be seen from growing cement-to-fuel sales and demand for home appliances to cars. That’s happening even as Pakistan added fewer than 2,900 cases last week compared with almost 35,000 cases in a week in June, and 96 per cent of the total 300,000 infected have fully recovered.

“It has surprised everybody,” said Muzzammil Aslam, chief executive officer at Tangent Capital Advisors Pvt., who expects economic expansion at 4-5 per cent in the year from July, higher than the government’s 2.1 per cent target. “The growth is led by an aggregate demand push.”

Also read: China-backed projects fuel Pak’s biggest steel IPO in 5 years

Here’s a look at sectors where activity is ticking and why:

Construction boom

Cement sales rose 38 per cent from a year ago to 4.8 million tons in July, and near a record level seen in October. A government program to give amnesty to tax evaders, provided they fund construction projects, is expected to fuel activity — and demand for cement — as work resumes after the lockdown.

“We expect dispatches to continue their rising run moving forward because of tax measures,” said Saad Khan, research head at IGI Securities Ltd. Substantial decline in interest rates and mandatory targets given for banks to increase housing and construction financing to at least 5 per cent of private sector credit will also help, he said.

Also read: Pakistan’s stock market, Asia's best performer, is just getting started

Cement sales eased to 3.5 million tons in August, mainly because of torrential rains across the country.

Fuel sales

Gasoline sales in June rose to a record high as people return to work after lockdown measures eased in May, according to AAH. Soomro, managing director at KASB Securities Pvt. Sales have stayed elevated in July and August.

Fuel for power generation has increased as well. Fuel oil sales rose in June to the highest in a year while LNG spot cargo purchase resumed in June after a six-month hiatus.

Car sales

Local car deliveries have recovered to about 10,000 units after four months as the end of lockdown ushered in new demand.

Kia Motors Corp’s local unit is planning to add a second shift at its factory in Karachi from January.

Manufacturing

Manufacturing output improved for a second consecutive month in June. The overall recovery in large-scale manufacturing will likely be stronger in the October-to-December quarter with worldwide demand picking up, said Khaqan Najeeb, a former adviser to Pakistan’s finance ministry. Home appliances are also seeing robust demand, said Haroon Ahmad Khan, chief executive officer at Waves Singer Pakistan Ltd.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on September 14, 2020
This article is closed for comments.
Please Email the Editor