LSM grows by 10.4pc in Q2, highest Since Q4-FY07: Sbp

tHe large-scale manufacturing (LSM) grew by 10.4 percent in the second quarter of the current fiscal year 2020-21, which is the highest quarterly LSM growth since Q4-FY07, according to the State Bank of Pakistan (SBP).

The SBP released its Second Quarterly Report on the State of Pakistan’s economy for the fiscal year 2020-21 on Thursday. The report highlights the strengthening of the economic recovery during the second quarter of the fiscal year, which was evident from the growing pace of industrial activity, the promising output of major Kharif crops (with the exception of cotton), and a pick-up in the services sector during the review period.

The large-scale manufacturing (LSM) grew by 7.6 percent during H1FY21, with its growth in the second quarter accelerating to 10.4 percent, the highest quarterly LSM growth since Q4FY07. Construction-allied and food processing industries generated much of the momentum in industrial activity. The construction industry benefited from the favourable policy environment, which included the government’s fiscal incentives under the construction support package, the Naya Pakistan Housing Scheme, as well as financial measures from the State Bank.

Within agriculture, most of the major Kharif crops performed better than last year; this improvement was attributed mainly to increases in their areas under cultivation. The government’s support package for Rabi crops, comprising subsidies on key inputs, and an increase in the support price for wheat, are likely to bolster the overall crop sector growth.

However, cotton exerted a drag on the overall agricultural performance, as the revised production estimate of 7.7 million bales represented the lowest output since FY86. Nonetheless, due to the better output of other crops, the overall agriculture sector is expected to register positive growth.

As the economic momentum picked up and the country successfully navigated the second wave of Covid without resorting to strict mobility restrictions, firms’ demand for credit nearly doubled on YOY basis during H1-FY21, said the report.