LSM likely to grow 2-2.5pc in FY11

LSM likely to grow 2-2.5pc in FY11

KARACHI: The large scale manufacturing (LSM) in the country is likely to grow by 2-2.5 percent in this fiscal year, economists said.

“Large scale manufacturing sector broadly contributes 12 percent to the country’s GDP. With better performance posted during FY10 of 4.4 percent, the recent trend suggests a sharp downturn once again,” said Farhan Bashir, an economist at Invest Capital.

 

During the first quarter of 2010-2011, LSM contracted by 1.5 percent mainly because of subdued production of heavyweights such as textile, petroleum, fertiliser, cement and steel.

“Broadly speaking, the trend is reflective of the impact of flood, which subdued production owing to logistic lapses and supply disruption,” Bashir said.

 

The textile sector, the heavyweight contributor to industrial production, is expected to take a hit because of damage to domestic cotton output, high raw material prices, structural issues in maintaining competitiveness and higher interest costs.

 

Manufacturing in the petroleum sector could see a revival and grow by 7.1 percent. On the oil front, throughput is expected to rise on the back of recent revival in international oil prices and the resultant improvement in refinery spreads on regional levels. The scenario for domestic refineries has improved as throughput is expected to increase. Despite adverse economic conditions, the auto sector is expected to continue posting better numbers in cars, jeeps and motorcycles owing to strong demand.

Cement and fertiliser are expected to benefit from revival in demand as well as additional capacity anticipated to be operational during the second half of this fiscal year. These sectors are expected to place LSM growth in green zone during the second half