Prosperity Index has made a strong recovery due on the back of improvements in large-scale industrial manufacturing, trade volume and long-term loans to private sector for fixed investment. Inflation is inching upwards while private sector long term credit borrowing is witnessing an improvement following systematic reductions in discount rate by the State Bank.
The report finds that during the months of May and June 2020, Pakistan witnessed a strong recovery in prosperity due to resumption of economic activity, which faced discontinuation due to government’s measures to check the spread of Covid-19. As economic activity returns to its pre-lockdown levels, inflation control, once again, requires urgent attention of the government.
The previous issue of the report noted that while supply-side constraints are easing out, demand side constrains to economic growth might manifest in future. However, no related impact has been noted in inflation, trade volume, large-scale manufacturing, or long-term credit to the private sector.
Monthly prosperity index has been calculated from July 2019 to June 2020. The results reveal a substantial overall improvement in prosperity between this period.
For July 2020, the month-on-month inflation, quantum index of LSMI, total trade volume, and loans to private sector (LTFF) increased by 0.8%, 16.8%, 28.8%, and 8.2% respectively.
The prosperity index estimated by using the June 2020 data on four indicators is 109.2. This figure is close to the February 2020’s index value of 109.6, indicating that the dent in prosperity following the Covid-19 outbreak in Pakistan has now achieved a recovery.
In order to determine if economic prosperity has increased or decreased, a base period is required. For the purpose, prosperity index of May 2020 has been used as a baseline, which stood at 96.8. The analysis reveals economy’s prosperity has increased by 12.4 percentage points in June 2020 relative to May 2020. This improvement in economic prosperity has resulted due to increases in total trade volume, large scale manufacturing, and commercial bank’s lending to private sector. A reduction in purchasing power acted as the only inhibiting factor. To read more, download the file attached below: