CAD: Exports oriented sector continues to sadden

March 19, 2020 (MLN): Despite 71% YoY improvement in Current Account Deficit (CAD) during 8MFY20, exports-oriented sector continued to sadden as the improvement is solely accredited to decline in imports and increase in remittances.

SBP data shows that during eight months period, exports increased slightly by 3% YoY to $20.1 billion, suggesting that the bulk of improvement in CAD came through reduction in import bill which shrank by 15% YoY to $35.7 billion.

This dragged down the trade deficit to $13.2 billion as compared to $19.93 billion in the corresponding period of last year.

The data also shows that, increase in inward remittances by 5% YoY to $15.1 billion also appeared as a major breather for country’s CAD.

Within country’s financial account, Foreign Direct investment which has been improving since the beginning of FY20, witnessed a significant rise of 75% YoY to $1.9 billion against $1.1 billion in Jul-Feb FY19.

The has led the CAD to decline to 1.5% of country’s GDP during the period under review as compared to 5% in the same period of previous year.

In the coming months, the CAD is expected to improve further in the wake of COVID-19 as decline in international oil and commodity prices would effectively lower country’s import bill going forward.

However, the risk of decline in exports and remittances cannot be ruled out here as the external demand is likely to hit hard by global economic slowdown and lock down of major cities due to Coronavirus outbreak.

Copyright Mettis Link News