Fast Market Research recommends "Pakistan Business Forecast Report Q4 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 09/03/2013 -- Against the backdrop of the high degree of political legitimacy conferred by the turnout in the 2013 general elections, the Pakistan Muslim League-Nawaz (PML-N)'s strong showing suggests to us a more stable government setup over the coming years, and one that will have more legislative freedom to enact its agenda.
2012 was one of Pakistan's deadliest and most violent years on record, which makes the government and the Pakistani Taliban's peace overtures all the more significant.
Contrary to our expectations, the Pakistani economy witnessed a marked slowdown in growth last fiscal year (FY2012/13 [July-June]). Going forward, we cannot ignore the build-up in economic momentum through FY2012/13 and the strong tailwinds that are in play. As such, we project full-year real GDP growth to rebound to 4.0% this fiscal year, from 3.6% in FY2012/13. To be sure, the economy is likely to continue to be plagued by the difficulties posed by the long-running energy crisis and the still-poor security environment.
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Over the medium-to-long term, we believe that the rupee is likely to be on a more stable trajectory, as a few key developments of late (such as the forward movement towards a new IMF deal) are likely to send a positive signal to foreign investors.
The government unveiled its Strategic Trade Policy Framework for 2012-15, which specifically prioritised the need to boost the country's export earnings. On balance, while the framework contains both positive and negative elements, we believe that it should improve the country's external trade prospects over the medium term. Despite the State Bank of Pakistan (SBP)'s aggressive dovishness over the past few years, we do not expect the central bank's reverse repo rate to be taken below the 9.00% mark, taking into account rising inflationary pressures on the back of the ongoing surge in broad money supply growth.
The PML-N's budget for FY2013/14 largely stuck to the party's 2013 manifesto. While it is implementation that matters most, we cannot help but be encouraged by the administration's ambitious agenda to reverse the deterioration in Pakistan's fiscal position. We are pencilling in a reduction of the government's deficit to 6.8% of GDP in FY2013/14.
The fiscal incentives introduced by the recently-finalised and longawaited Special Economic Zones Act, 2012 should help to alleviate the weak state of investment activity in Pakistan. As such, the recent law is a welcome move from the government.
Major Forecast Changes:
We have upgraded our end-2014 rupee projection to PKR102.00/ US$, from PKR105.00/US$ previously, implying broad stability over the longer term.
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