ISLAMABAD: Pakistan’s manufacturing sector posted a modest growth of 1.3% in Fiscal Year 2024–25, down from 3.0% in the previous fiscal year, according to the Pakistan Economic Survey 2024-25 released on Monday.
The slowdown was primarily driven by a 1.5% contraction in Large-Scale Manufacturing (LSM), amid high input costs, energy shortages, and structural inefficiencies that continue to weigh on industrial performance.
Despite some encouraging signs of macroeconomic stabilization—including easing inflation, improved external accounts, and a cumulative 850 basis points cut in the policy rate—industrial output remained low.
The Economic Survey noted that “the manufacturing and mining sectors faced dismal outcomes” amid import compression, exchange rate volatility, and persistent energy constraints.
The LSM segment, which contributes 8.0% to GDP and 67.5% of the manufacturing sector’s share, recorded negative growth for the third consecutive year.
Major drags included the chemicals sector (-5.5%), non-metallic minerals (-10.5%), iron & steel (-10.9%), and electrical equipment (-15.9%).
The food sector also posted a slight contraction of 0.5%, while the furniture industry saw a sharp decline of 61.1%.
Meanwhile, Small-Scale Manufacturing (SSM) and Slaughtering showed resilience, growing by 8.8% and 6.3% respectively, partially offsetting the slump in LSM.
The wearing apparel sector grew by 7.6%, supported by rising export demand, while the textiles sector recovered by 2.2% after an 8.8% decline last year—sustained by better macro conditions and redirected export orders due to labour disputes in Bangladesh.
A standout performer was the automobile sector, which surged 40% during the first nine months of FY2025.
The rebound came on the back of exchange rate stability, reduced interest rates, and the launch of 31 new vehicle models—including electric and hybrid variants.
The sector also benefitted from increased localization and the creation of over 8,000 jobs.
However, mining and quarrying continued to struggle, contracting by 3.4%. The decline was driven by a significant drop in the output of crude oil (-14.8%), natural gas (-6.8%), and coal (-5.7%).
Nonetheless, non-metallic minerals showed strong growth, with sulphur surging by 341.9%, limestone by 34.1%, and marble by 20.2%.
Pharmaceuticals posted modest growth of 2.3% during July–March FY 2025, while the beverage sector managed a mild recovery of 0.9% after a decline of 3.9% last year.
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Meanwhile, tobacco (13.1%), computers and electronics (2.6%), and other transport equipment (32.8%) demonstrated signs of recovery, albeit from low bases.
The Economic Survey notes that nearly half of the LSM basket showed positive growth, but the overall momentum was offset by steep declines in several heavy-weighted sectors.
“Targeted reforms, infrastructure investments, and streamlined regulations are critical to unlocking the potential of Pakistan’s industrial base,” the Economic Survey states.
With manufacturing and mining jointly contributing 13.2% to GDP, the government faces pressing challenges in revitalizing these sectors to achieve inclusive and broad-based economic growth in the coming years.
