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"Pakistan Business Forecast Report Q2 2013" Is Now Available at Fast Market Research

Fast Market Research recommends "Pakistan Business Forecast Report Q2 2013" from Business Monitor International, now available

 

Boston, MA -- (SBWIRE) -- 03/15/2013 -- Core Views

With general elections scheduled to be held this year, we believe that the ruling Pakistan People's Party (PPP), which heads up the present coalition government, faces an uphill struggle for re-election. The government's handling of the economy and its relationship with the US are likely to be its key political liabilities.

2012 was one of Pakistan's deadliest and most violent years on record, which makes the Pakistani Taliban's recent peace overtures all the more significant.

The economic data coming out of Pakistan of late paints a relatively encouraging picture with the economy looking poised to record a faster rate of growth this fiscal year (FY2012/13, July-June), in line with our expectations.

However, while key structural headwinds have somewhat receded, it does not mean that they have been full resolved. Therefore, we are happy to keep our FY2012/13 real GDP forecast of 4.0%, just below the government's 4.3% target.

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Our view for gradual weakness in the Pakistani rupee continues to play out well. Given the ongoing balance of payments dynamics in play, we expect this gradual depreciatry trend to persist largely unabated.

Despite the State Bank of Pakistan (SBP)'s aggressive dovishness over the past six months, we do not expect the central bank's reverse repo rate to be taken below the 9.50% mark, taking into account rising inflationary pressures.

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 new law is a welcome move from the government.

Major Forecast Changes

We have revised our official rupee targets to reflect our expectations for further weakness, as our previous projections proved to be on the conservative side. We expect the unit to weaken to PKR102.00/ US$ by end-2013.

In light of the recent acceleration in money supply growth, we have nudged up our end-FY2012/13 consumer price inflation forecast upwards to 8.0%, from 7.0% previously.

Key Risks To Outlook

Upside Risks To Inflation: Should external financing fail to materialise or should the government fail to mobilise its domestic resource base, it could result in further budgetary borrowings from the banking system, thus stoking inflation. Furthermore, still elevated global food and energy prices remain of particular concern from an inflationary standpoint.

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