Pakistan Prosperity Index up 13% on improved business activities

LAHORE: The Pakistan Prosperity Index (PPI) has increased 12.8 per cent on account of improvement in the business activities, a report issued by PRIME revealed on Thursday.

The Pakistan Prosperity Index is an agglomeration of trade volume, lending to the private sector, purchasing power and manufacturing output indices.

The trade volume witnessed an increase of Rs548 billion year-on-year and Rs360 billion month-on-month on account of resumption of business activities and opening up of international markets.

The private sector borrowing from the banks showed a continuous surge with Rs170 billion YoY and Rs25 billion MoM increase. This trend can be credited to lower cost of borrowing and a reduction in the budget deficit, which has reduced the government’s borrowing needs from the commercial banks; thus, reducing the crowding out effect.

In the context of purchasing power, the YoY inflation was reported at 9.7 per cent, while the MoM inflation clocked-in at negative 0.3 per cent, a manifestation of improvement in the purchasing power.

The prevalent high levels of inflation are on the back of hikes in food and energy prices.

The large-scale manufacturing (LSM) increased 4.36 per cent MoM. This increase can be attributed to the higher demand emanating from the ease in lockdown, mass vaccination and opening up of business.

In addition, higher production cost fuelled by higher energy prices, and supply side disruptions of the raw material all had a fair share in restricting LSM’s output.

Notwithstanding, the overall economic outlook, as measured by the Pakistan Prosperity Index, seems to be encouraging.

The performance of the economy indicated by the index is consistent with the latest Business Confidence Survey 2021 conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI), which also illustrated the strengthening of the business confidence and augmented growth prospects on the back of uptick in the business activities.

With the ease in the lockdown restrictions and a mass vaccination drive, the overall state of the economy seems encouraging and on the right track. However, there is still a need to curb the inflationary pressure, as this will not only improve the purchasing power/real incomes but also reduce the input cost of the large-scale manufacturing.

Addressing the supply side shocks of basic food items is pertinent to lower food inflation, which is the main cause of rising overall inflation in the economy. These supply side shocks call for more liberal trade measures and elimination of the state intervention in the market.

The PRIME Institute publishes the Pakistan Prosperity Index report with a lag of two months based on the availability of required data; the current report comprises data from July 2020 to June 2021.

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