KARACHI, Jan 7: Global recession and emerging deflation in the developed countries has started affecting Pakistan’s exports, which are gradually declining since October. Though, the overall exports of the country during first 5 months (July-Nov-08) increased by 11.8 per cent, the trend shows that exports are sliding downward.

Exports fell to $1.427 billion in October as compared to $1.954 billion in September. November figure slightly improved to $1.595 billion but is still much lower than the export trend set in July, August and September of the current fiscal.

“Exports orders are shrinking but this will be clear in next couple of months as the new year has started and the peak demand in the developed countries like the US and Europe is now over,” said Aamir Aziz, a textile exporter.

Last month, the US officially announced the existence of recession, which means economic growth is slowing down and demand is declining. The US is the major market for Pakistani export.

Aamir said that falling prices in the developed markets, especially in the US, was causing another problem for Pakistani products. These export products would not fetch the real price and their sale below cost price would erode profitability of the exporters.

The economists in the US sighted clear sign of deflation which means an extended decline in the average level of prices.

Cost of exportable products are high in Pakistan as the higher power prices and transportation cost coupled with 24 per cent general inflation has made things worse for the sector.

The very high lending rate emerged as yet another major factor to overload the cost of products. The manufacturers have been demanding cut in the lending rate, which is 20 per cent and above.

Kamran Rehmani, researcher at First Capital Equities said the textile export showed bleak performance in the wake of shrinking demand in the western economies.

During Nov 2008, average exports of cotton yarn and cotton cloth have come down by 8 per cent and 16 per cent, respectively. During the period (July-Nov 08) Pakistan’s textile export declined by 2 per cent to $4.4 billion against $4.5 billion in the corresponding period of last year.

“Alone in Nov 2008, textile export registered a decline of 7 per cent,” said Rehmani.

However, due to depreciating Pak rupee against the dollar, yarn and cotton cloth exports in rupee term improved by 23 per cent and 22 per cent in 5 months (July-Nov 08), respectively.

Analysts said the depreciating rupee against the dollar has given great support to the Pakistani exporters, who still make profit despite high inflation and tough competition in the global market.

The dollar appreciated by 23 per cent against rupee during 2008. It badly hit the economy but remained supportive of the exports.