Market Research Logo

Pakistan Country Risk Report Q1 2019

Pakistan Country Risk Report Q1 2019

We maintain our forecast for Pakistan's real GDP growth to slow to 4 4% in FY2018/19 and 4 1% in FY2019/20, from 5 4% in FY2017/18 An IMF bailout is likely on the cards, and we expect this to trigger an import crunch and higher interest rates We expect consumption and investment to be negatively hit on the back of a likely contraction in non-energy imports

New Pakistani Prime Minister Imran Khan appears to be broadly committed to his anti-graft campaign promise, and has enacted positive policies to signal his administration's stance However, we note that these are mostly low-hanging fruits The anti-corruption drive will likely be a tough battle given the PTI's relatively weak standing in the parliament The make-up of the cabinet (of career-politicians) and plans to increase welfare spending are unconducive to reduce corrup-tion

Following the 100bps hike in September, we expect the SBP to raise its target policy rate by a further 50bps to 9 00% by the end of FY2018/19 Inflationary pressures are likely to continue to mount and we are skeptical about the administration's ability and willingness to carry out painful fiscal reforms

Pakistan is increasingly in need of external funding, and an IMF bailout is likely on the cards despite US resistance We are sceptical about the government's commitment to fiscal reforms We expect the fiscal deficit as a share of GDP to come in at 5 8% of GDP in FY2018/19, versus the budget target of 4 9%

We remain bearish on the Pakistani rupee and see a strong likelihood of further currency devaluation by the SBP Fundamental depreciatory pressures stemming from the persistently wide current account deficit will force the SBP to either draw down its limited foreign exchange reserves further, or allow the currency to weaken The drying up of external financing due to rising risk-off sentiment globally and higher interest rates in the US will likely exacerbate downside pressure on the currency Over the long-term, we believe that higher inflation will continue to drive the currency weaker, and we forecast the currency to slide against the USD by about 4% per annum

Key Risks


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Pakistan Set For Economic Reset
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: NET EXPORT AND IMPORT PARTNERS
TABLE: MAIN IMPORTS AND EXPORTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
State Bank Of Pakistan To Hike Further On Mounting Inflation
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
IMF Bailout Likely For Pakistan But Major Reforms Less So
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
More Pakistani Rupee Weakness To Come, IMF Agreement Or Not
TABLE: FITCH SOLUTIONS CURRENCY FORECAST
Pakistan Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Pakistani Economy To 2027
Significant Opportunities For Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Pakistan's New PM To Face A Tough Battle In Fighting Corruption
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Instability To Prevail, But Outright Collapse Unlikely
TABLE: SCENARIO MATRIX: EVOLUTION OF STATE
TABLE: SCENARIO MATRIX: CENTRIFUGAL VERSUS CENTRIPETAL FORCES
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE AGREEMENTS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Contagion Risks Limited To EMs For Now
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: PAKISTAN – MACROECONOMIC DATA & FORECASTS

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report