Finance ministry reports signs of economic recovery

ISLAMABAD: The Ministry of Finance has reported mixed signals in the Large-Scale Manufacturing (LSM) and agriculture sectors for the first quarter (July-September) of the current fiscal year, while also highlighting a decline in CPI-based inflation.

“The LSM continues to show mixed signals, with year-on-year (YoY) growth remaining negative, yet MoM growth indicating signs of recovery. Industrial output is gradually stabilizing, and key sectors are beginning to ramp up production. Although challenges persist, particularly in the domestic market, the outlook remains cautiously optimistic” the Ministry of Finance stated in its monthly economic outlook released on Wednesday.

It says that the positive monthly growth suggests momentum could gather in the coming months, supported by a favourable economic environment on both domestic and external fronts. Economic recovery will take advantage of declining inflation and the continuation of fiscal consolidation in the coming months. Inflation is expected to remain 6-7 per cent in October and further down to 5.5–6.5 per cent by November 2024.

On the agriculture front, although cotton production remains a concern, the sector’s push towards mechanisation and better resource management offers a promising outlook for FY2025. This trend aligns with the government’s broader vision of promoting sustainable agricultural growth through technological advancement. External sector stability sustained during Q1 FY2025. Imports are reasonably increasing and providing impetus to economic recovery. Based on the currently observed trend, it is anticipated that in October 2024, the exports will remain within the range of $2.5-2.8 billion, imports $4.5-4.9 billion and workers’ remittances at $2.8-3.3 billion.

Pakistan’s economy has demonstrated sustained recovery during the first quarter of FY2025. Stability in both the fiscal and external sectors has been maintained, supported by significant financial inflows. Pakistan has received the first tranche of $1.03 billion under the IMF EFF programme, reinforcing macroeconomic stability. Moreover, the successful hosting of the SCO Summit 2024 in Pakistan are paving the way for business and market confidence. In the wake of positive developments, the economy will continue to observe sustainable economic recovery in the coming months. Large-scale manufacturing (LSM) on an MoM basis observed a substantial growth of 4.7 per cent in August 2024, reflecting the revival of economic activities. However, it has observed a slight dip of 0.2 per cent during July-August FY2025, compared to 2.5 per cent contraction in last year. During the period, 13 out of the 22 sectors witnessed positive growth; this includes textile, food, beverages, wearing apparel, coke & petroleum products, chemicals, automobiles and paper and board. During Jul-Sep FY2025, the production and sales of all vehicles witnessed the growth of 18.1 per cent and 17 per cent, respectively. Major growth drivers included, production of cars increased by 29.9 per cent, trucks & buses by 95.5 per cent and jeeps and pick-ups by 34.1 per cent. During Jul-Sep FY2025, total cement dispatches were 10.3 million tonnes, of which domestic dispatches stood at 8.1 million tonnes. Cement exports increased by 22.2 per cent to 2.1 million tonnes. In September 2024, cement dispatches recorded at 3.5 million tonnes compared to 3.7 million tonnes last year. Whereby, local cement dispatches stood at 2.6 million tonnes and export dispatches rose by 71.5 per cent, with volumes increasing to 978,871 tonnes.

During Jul-September FY2025, CPI Inflation stood at 9.2 per cent while it was 29 per cen…