Global slowdown impairing Pakistan’s external trade

Pakistan Bureau of Statistics has released its monthly exports and imports numbers for the month of October 2022. The data showed country’s trade deficit shrinking 19.8%MoM and 40.4%YoY during the month under review. 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$21.1 billion. Exports have actually posted a slight increase of 1.1%YoY to settle around US$9.6 billion.

Country’s largest export oriented sector, Textiles and clothing has reported a decline of 1.3%YoY during 4MFY23 and remained at US$5.9 billion as compared to US$6.0 billion during the same period of last year.

Cotton yarn exports registered 27.7%YoY decline in July-October to US$285.315 million as compared to US$394.8 million during the same period last year.

Bed wear exports declined by 9%YoY to US$1.0 billion from US$1.1 billion during the same period.

As against this, Knitwear exports increased by 7%YoY to US$1.7 billion which contained the overall decline in textile exports.

Moving forward, the outlook of textile exports remain hazy owing to unavailability of gas to the sector during winters and a global slowdown expected to impact demand.

Country’s import bill continued to contract, declining by 16%YoY owing to slowdown in economy and high base effect.

The largest declines were registered in the categories of Petroleum and machinery groups imports, posting declines of 47%YoY and 40%YoY respectively and were the key reason for an overall decline in imports.

Food imports grew by 10%YoY during the period under review to US$3.4 billion owing to higher Wheat (local crop destruction) and Palm Oil imports (shift from crude imports to refined imports).

With global economy heading towards a slowdown as the major central banks around the world jack up their interest rates, the quantum of world trade is likely to contract significantly.

The 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, analysts expect FY23 to close with a CAD of 3% of GDP.