Karachi, November 18, 2022 (PPI-OT): Pakistan Economy: Global slowdown manifesting on external trade

Pakistan Bureau of Statistics released its monthly exports and imports numbers for the month of Oct’22. The latest PBS data showed country’s trade deficit shrinking 19.8%/40.4% MoM/YoY during Oct’22. On cumulative basis, the trade deficit has eased off by 26.2%YoY during 4MFY23.

The improvement in balance of trade during 4MFY23 largely comes on the back of easing import bill, which has come off by 12.4%YoY during the period under review to clock in at US$21.1bn. Exports, on the other hand have actually posted a slight increase of 1.1%YoY to settle around US$9.6bn.

Country’s largest export oriented sector, Textiles, reported a decline of 1.3%YoY during 4MFY23 and remained at US$5.9bn as compared to US$6.0bn during the same period of last year. However, the momentum is unlikely to continue for much longer owing to unavailability of gas to the sector during winters.

On imports front, the largest declines were registered in the categories of Petroleum group and machinery groups imports which posted declines of 47%YoY and 40%YoY respectively and were the key reason for an overall decline in imports.

With global economy heading towards a slowdown as major central banks around the world jack up interest rates, the quantum of world trade is likely to slowdown significantly. Global commodity prices are also likely to ease off significantly which bodes well for Pakistan. Conversely, the country’s exports will also contract as the country’s largest export oriented industry struggles against the unavailability of gas. Consequently, we expect FY23 to close with a headline CAD of ~3% of GDP.