Pakistan Prosperity Index – April 2022

16/05/2022by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index – April 2022

Prosperity spirals downward due to rising global and domestic inflation

Over December 2020- November 2021, economic prosperity deteriorated by 1.7 points, according to PRIME’s latest report Pakistan Prosperity Index. The decline in overall country’s economic performance can be attributed to continuously soaring inflation, currency devaluation and fall in foreign investment.

Purchasing power continues to decline as the Y-o-Y inflation was reported at 11.5%, while the M-o-M inflation clocked at 3%. The prevalent high levels of inflation are due to soaring supply-demand gap emanating from monetary expansion carried out through commercial banks’ investment in government securities, higher inflow of remittances, falling productivity, and rising international commodity and petroleum prices.

Local currency, the rupee, has remained volatile thus contributing to the uncertainty. In past 12 months, depreciation of rupee has been 8%. Average monthly exchange rate stood at Rs.173 against dollar in November 2021 compared to Rs.171.7 in October 2021.

Inflow of foreign direct investment to the country has seen a plunge due to expeditious spread of COVID around the globe. FDI stood at $220 million in November 2021 compared to $300 million last month.

The trade volume witnessed an increase of Rs.688 billion Y-o-Y and Rs.350 billion M-o-M on account of an increase in domestic and international demand. In M-o-M trade growth, exports experienced an increase of Rs.79 billion while imports increased by Rs.273 billion compared to October 2021.

Large Scale Manufacturing (LSM) output posted a growth of 1.91% M-o-M and 0.3% Y-o-Y. The slowdown in manufacturing activities on yearly basis is due to significant increase in the energy and input prices along with gas load shedding while monthly increase is associated with rising demand.

The private sector borrowing from banks has been on an upward trajectory with Rs.214 billion Y-o-Y and Rs.22 billion M-o-M increase. The borrowing continues to increase despite the hike of 150 basis points in policy rate to 8.75% in November due to higher domestic demand.

The overall economic performance, as measured by PPI, is not encouraging due to mounting challenges. The burgeoning current account deficit on the back of significant increase in the international commodity and energy prices and the resultant hike in the policy rate will contribute to slow down in the economic activities in the country. Inflation remains a big concern, which could be mitigated by addressing the supply side bottlenecks such as lower productivity and interruption in the supply of energy.

Read full report here;

Pakistan Prosperity Index – April 2022 Download

PPI Methodology April – 2022 Download

PRIME Institute publishes monthly PPI report with a lag of two months due to availability of data, which comprises trade openness, soundness of rupee, foreign investment, lending to private sector, purchasing power and manufacturing output indices.

For inquiries, please contact saad@primeinstitute.org or call at 03345397644.

Pakistan Prosperity Index – January 2022

04/02/2022by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index – January 2022

Prosperity Index declines due to soaring commodity and petroleum prices

Read full report here;

Pakistan Prosperity Index – January 2022Download

PPI Methodology January – 2022Download

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Pakistan Prosperity Index – December 2021

24/12/2021by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index – December 2021

Economic prosperity improves amid rising energy constraints

Over November 2020-October 2021, economic prosperity has improved by 1.5%, according to PRIME’s latest report Pakistan Prosperity Index. The improvement in overall country’s economic performance can be attributed to higher business activity on the back of rising domestic and international demand of goods and services, decline in supply chain distortions and return to normalcy.

The trade volume witnessed an increase of Rs.538 billion Y-o-Y and Rs.3.8 billion M-o-M on account of an increase in domestic and international demand. In M-o-M trade growth, exports witnessed an increase Rs.19 billion, while imports witnessed a decline of Rs.15 billion in October 2021.

Purchasing power continues to decline as the Y-o-Y inflation was reported at 9.2%, while the M-o-M inflation clocked at 1.9%. The prevalent high levels of inflation are due to soaring supply-demand gap emanating from monetary expansion carried out through commercial banks’ investment in government securities, higher inflow of remittances, falling productivity and surging petroleum prices.

Large Scale Manufacturing (LSM) output posted a growth of 1.9% M-o-M, while a decline of 1.2% Y-o-Y. The slowdown in manufacturing activities on yearly basis is due to significant increase in the energy and input prices while monthly increase is associated with rising demand. The automobile industry maintains leading position with the growth of 1.2% while textile and food industries having weightage of 21% and 12% showed growth of 0.1% and 0.4%.

The private sector borrowing from banks has been on an upward trajectory with Rs.197 billion Y-o-Y and Rs.19 billion M-o-M increase. The borrowing continues to increase despite slight hike of 25 basis points in policy rate and indication of further hike in coming months. However, the borrowing is likely to slow down after recent hikes in the policy rate.

The economic performance is encouraging but caution is needed due to prevalent challenges. The burgeoning current account deficit on the back of significant increase in the international commodity and energy prices and the resultant hike in the policy rate will contribute to slow down in the economic activities in the country. This is cardinal factor in the yearly decline in manufacturing sector output.

The surging global energy prices translates into domestic inflation thus declining the purchasing power/real incomes of the citizens and hinders the economic activity. Instead of relying on administrative measures to control prices, addressing the supply side bottlenecks such as lower productivity and interruption in the supply of energy are imperative to lower inflation, especially food inflation, which is the main cause of rising overall inflation in the economy.

The overall economic outlook, as measured by PPI, shows improvement and supports the government’s growth targets. The supply side shocks call for more liberal trade measures and elimination of state intervention in the market. Moreover, prudent economic planning is needed to curtail fiscal deficit.

PRIME Institute publishes monthly PPI report with a lag of two months due to availability of data, which comprises trade volume, lending to private sector, purchasing power and manufacturing output indices.

Click Below to read full Report & Methodology:

Pakistan Prosperity Index – December 2021

PPI Methodology-December 2021

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Pakistan Prosperity Index – November 2021

29/11/2021by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index – November 2021

Economic prosperity improves albeit soaring challenges

Over October 2020-September 2021, economic prosperity has improved by 2.4%, according to PRIME’s latest report Pakistan Prosperity Index. The improvement in overall country’s economic performance can be attributed to higher business activity on the back of rising domestic and international demand of goods and services, erosion of pandemic enforced distortions and return to normalcy.

The trade volume witnessed an increase of Rs.483 billion Y-o-Y and Rs.62 billion M-o-M on account of depreciation of local currency and rise in international demand. In M-o-M trade growth, exports witnessed an increase Rs. 36 billion, while imports witnessed an increase of Rs. 26 billion in September 2021.

Purchasing power declined as the Y-o-Y inflation was reported at 9%, while the M-o-M inflation clocked at 2.1%, an illustration of continuous decline in the purchasing power. The prevalent high levels of inflation are due to soaring supply-demand gap emanating from monetary expansion through commercial banks’ investment in government securities, currency devaluation and higher inflow of remittances, falling productivity and surging petroleum prices.

Large Scale Manufacturing (LSM) output posted a negative growth of 0.72 % M-o-M, while a positive growth of 0.1% Y-o-Y. This slowdown in manufacturing activities can be attributed to negative growth in 8 sectors, textile and food related industries in particular, which have 33% weightage in Quantum Index of Manufacturing. The automobile industry posted highest growth of 1.4% among all other industries.

The private sector borrowing from banks has been on an upward trajectory with Rs.194 billion Y-o-Y and Rs.24 billion M-o-M increase. This increasing trend can be credited to moderate cost of borrowing and a push from State Bank of Pakistan to the commercial banks to increase lending to the private sector.

The surging global energy prices translates into domestic inflation thus declines the purchasing power/real incomes of citizens and hinders the economic activity. Instead of relying on administrative measures to control prices, addressing the supply side shocks such as lower productivity and output is imperative to lower inflation, especially food inflation, which is the main cause of rising overall inflation in the economy.

The overall economic outlook, as measured by PPI, shows improvement and supports the government’s growth agenda. The supply side shocks call for more liberal trade measures and elimination of state intervention in the market. Moreover, prudent economic planning is needed to curtail fiscal deficit when revenue collection will be low from envisaged petroleum products.

Click Below to read full Report & Methodology:

Pakistan Prosperity Index – November 2021

PPI Methodology – November 2021

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Pakistan Prosperity Index – October 2021

26/10/2021by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index – October 2021

Economic prosperity improves amid soaring challenges

Over September 2020-August 2021, economic prosperity has improved by 7.2%, according to PRIME’s latest report Pakistan Prosperity Index. The improvement in overall country’s economic performance can be attributed to opening up of businesses locally and trade internationally after mass vaccination drive, growth in manufacturing activities especially in auto industry from surge in the demand of vehicles and improvement in the employment of labor force.

The trade volume witnessed an increase of Rs.629 billion Y-o-Y and Rs.183 billion M-o-M on account of depreciation of local currency and rise in international demand.

Purchasing power declined as the Y-o-Y Inflation was reported at 8.4%, while the M-o-M inflation clocked at 0.6%, an illustration of decline in purchasing power. The prevalent high levels of inflation are at the back of hike in global commodity and petroleum prices and weak domestic currency.

Large Scale Manufacturing (LSM) increased by 2.09% M-o-M. This increase can be attributed to significant growth in automobile, mineral products and food related industries, insignificant increase in 9 industries and negative growth in 3 industries i.e. fertilizer, rubber and electronics industries.

The private sector borrowing from banks has been on an upward trajectory with Rs.180 billion Y-o-Y and Rs.18 billion M-o-M increase. This increasing trend can be credited to lower cost of borrowing and a reduction in the government’s borrowing needs from the commercial banks thus reducing the crowding out effect.

The economic performance is encouraging but caution is needed due to prevalent challenges. Higher foreign currency demand and subsequent depreciation of rupee is making necessary imports expensive, which translates into higher cost of businesses and prevents manufacturing sector from operating at maximum potential. The surging global energy prices translates into domestic inflation thus declines the purchasing power/real incomes of citizens and hinders the economic activity. Instead of distorting markets through price controls and trade barriers, addressing the supply side shocks of basic food items i.e. lower productivity and output is imperative to lower food inflation, which is the main cause of rising overall inflation in the economy.

Click Below to read the full report & methodology:

Pakistan Prosperity Index - October 2021

PPI Methodology - October 2021

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Pakistan Prosperity Index: March 2021.

16/04/2021by PRIME Institute PRIME Institute No Comments

PRIME’s latest Prosperity Index reveals an encouraging picture of Pakistan’s economic rebound. The new year began with Pakistan Prosperity Index (PPI) standing at the highest mark, 126.1 (January 2021). A special feature of this edition is simultaneous improvement in purchasing power, credit to private sector and growth in large-scale manufacturing.

The financial and business uncertainties of 2020 have been carried forward in 2021 across the globe. However, Pakistan’s economy appears to be struggling less relative to its regional counterparts with key economic indicators on the rise. The report establishes the increase in prosperity as a result of the improvement in three out of four indicators aggregated to calculate PPI namely, purchasing power, private sector credit and growth of large-scale manufacturing.

To read the Report and Methodology, click on the PDF’s given below:

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Pakistan Prosperity Index- January 2021

18/01/2021by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Index (PPI) is a monthly review of Pakistan’s macro-economy based on the analysis of four periodic data sets- industrial production, trade volume, price levels, and private sector lending. On a 12-month rolling basis, this issue of the report covers the period December 2019 to November 2020, with June 2019 as the base period.

Following a dip in Aug 2020, Pakistan Prosperity Index continue to pose an upward trend reaching an all-time high of 116.3 in Nov 2020.
This new figure signals not just economic recovery but also provides a reason for optimism.
Despite the pandemic, over a 12-month period the trend faces an upward-sloping trajectory.

To read more, click on the PPI given below:

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To view detailed methodology, please click on the PDF given below:

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Pakistan Prosperity Report (PPR) April 2020

29/04/2020by PRIME Institute PRIME Institute No Comments

Policy Research Institute of Market Economy (PRIME), launched second edition of Pakistan Prosperity Report (PPR), with the aim to provide a monthly review of Pakistan’s macro-economy based on the analysis of four variables: Industrial Production, Trade volume, Price Levels, and Private Sector Lending.

The concept of PPR is intuitive – higher level of industrial output, increases in trade volumes, more lending to the private sector and an improvement in purchasing power of individuals are indicators of a strong economy, signaling prosperity of both firms and households.

In its second edition, PPR covers time period from June 2019 to February 2020. The analysis reveals that economy’s prosperity has increased by 0.96 percent in February 2020 relative to January 2020 while experiencing an overall increase since June 2019. This increase in economic prosperity is largely attributable to a rise in purchasing power, a surge in long-term financing facility and an increase in trade volume between the two months. However, the output of large-scale manufacturing industries slightly declined between January and February 2020.

For February 2020, the month-on-month inflation rate and quantum index of LSMI decreased by 1 percent and 0.91 percent respectively. In contrast, the trade volume index and LTFF increased by 3.20 percent and 3.63 percent.

The report expects that amid the coronavirus pandemic, Pakistan’s trade volume will shrink as a result of the slowdown in global demand. The production of large-scale manufacturing industries is likely to contract due to partial lockdown which will adversely affect the trade volume. Meanwhile, inflation might increase due to decrease in domestic production and shortage of essential commodities. On the other hand, commercial banks’ lending to private sector for long-term fixed investment might further increase with the hopes to stimulate construction and export-oriented sectors. With the recent amnesty scheme announced for the construction sector which is awarded the status of an industry now, it is expected that the banking credit will flow more into this sector at the expense of other sectors. All in all, low purchasing power, fear of losing jobs and low returns on investments upholds the bearish sentiments among the stakeholders of the economy in the coming months. To read more, download the file attached below:

Pakistan-Prosperity-Report_April-2020 Download

Pakistan Prosperity Report (PPR) March 2020

31/03/2020by PRIME Institute PRIME Institute No Comments

Pakistan Prosperity Report (PPR) March 2020

Indicators of prosperity exhibit improvement, face headwinds in the short term. Large-scale manufacturing and private sector investment improved, trade volume recovering, and purchasing power deteriorating.

Pakistan Prosperity Report (PPR) is a monthly review of Pakistan’s macro-economy based on the analysis of four periodic data sets- industrial production, trade volume, price levels, and private sector lending. The concept behind this report is intuitive- higher level of industrial output, increases in trade volumes, more lending to the private sector and an improvement in purchasing power of individuals are indicators of a strong economy, signaling prosperity of both firms and households.

It is pertinent to mention that we consider increase in trade volume more important than a change in trade balance. Increase in trade volume contributes to prosperity by enhancing the production and variety of goods available for consumption and industrial activities thereby increasing the income and employment opportunities. On the other hand, higher rates of inflation reduce prosperity by eroding purchasing power and incomes of individuals. Increase in industrial output enhances prosperity by increasing employment prospects and income. In contrast, provision of finance for long-term investment increases prosperity by boosting industrial capacity resulting in an increased output, employment and income opportunities.

The analysis in PPR (March 2020) is based on the data for December 2019 and January 2020. For a long- term view, data for the period of June 2019-December 2019 is separately covered.

To read more, download the file attached below:

Pakistan-Prosperity-Report_March-2020 Download