The State Bank of Pakistan’s third quarterly report on the state of the country’s economy shows the pace of economic growth slowed down considerably during FY19. This was mainly in response to the policy measures taken to curb the twin deficits. These measures affected the performance of the industrial sector and dampened manufacturing activities in the country.
According to the report, cement production recorded contraction of 5.4 per cent during July-March FY19, compared to double-digit growth of 12.4 per cent in the same period last year. This was the first decline in last eight years during July-March period. The decline may have been greater had it not been for cement exports, which partially offset the weakness in domestic demand.
The cement sector has been going through a major expansionary phase in recent years, mirroring the increase in economic activity in the country. Public sector development spending, complemented by CPEC outlays on infrastructure, provided a boost to the cement industry. However, this type of support may not be as forthcoming during the ongoing phase of macroeconomic stabilisation.
Cement exports grew 32.8 per cent YoY to US$221.3m in the period. A hefty 55.5 per cent increase in quantum exports offset the drag from lower unit prices. Facing continuously rising surplus capacity and declining local sales amid the slowdown in domestic economic activity, cement manufacturers have diverted their attention to mostly African markets. That said, the lower unit prices reflect the shift in the exporting product mix. The trend is for increased exports of the low-value clinker rather than finished cement.