While Pakistan’s trade deficit is declining, the drop in machinery and intermediate input imports is bad news as it is likely pointing toward productivity and output deceleration, according to World Bank (WB) Senior Economist, Gonzalo Varela.
On Pakistan’s state of exports, he said textile exports are likely headed towards recovery but it was too soon to tell.
We have disaggregated data for #Pakistan #trade from @StateBank_Pak for July-Jan FY23. Main trends in 🧵👇
— Gonzalo Varela (@gonwei) February 23, 2023
Underlining Pakistan’s latest trade deficit numbers, the trade and macroeconomic researcher highlighted that the country’s exports declined by 4.4 percent more in July-January FY23 as compared to FY22.
“Decline [was] driven by exports of goods (6.6%). Services exports instead grew.,” he pointed out.
Further addressing the export growth of different subsectors with services in the country, the economist remarked that Pakistan’s “merchandise exports fell with main destinations, while [it] increased to the EU”.
As per the sector-wise breakdown of the exports data, Varela noted that textiles and foodstuffs led the way, ahead of commodities such as vegetable products and minerals which contracted.
The data on month-to-month growth shows the export deceleration in vegetable and foodstuffs, but the top left graph in the snapshot below shows that the textile industry might just be heading for recovery soon.
Varela pointed out the improvement in some of the major services exports of knowledge-intensive services, mainly Telecommunication, Computer and Information Services, and Other business in particular, except for the tiny financial and construction services sectors.
The other side of trade shows that imports have fallen by 22.4 percent in July-January FY23, with a “substantially larger decrease than seen for exports”.
“By origin, Pakistan’s imports declined from China & the USA,” Varela observed.
The monthly breakdown of data for the most commonly imported materials clarifies some of the decelerations. “Zooming in month-on-month: decline in intermediates and machinery seem[s] to be deepening,” Varela added.
A deeper breakdown of the data reveals machinery imports have contracted across all types of machinery.
Varela concluded in his final remarks for Pakistan that the decline in the trade deficit, machinery, and intermediary input imports is likely signaling a slowdown in productivity and output. He hinted that textile exports might be recovering, but said it was too early to tell.
