Pakistan Economic Outlook

August 20, 2019

The economy likely capped FY 2019, which ended in June, on a sour note. Industrial production declined in April–May, while merchandise exports fell sharply throughout Q4 FY 2019. Turning to the first quarter of this fiscal year, while the IMF bailout and additional multilateral lending to the tune of USD 39 billion over the next three years should bolster the economy, it will likely only cover a portion of Pakistan’s exorbitant external financing requirements. Meanwhile, tensions between Pakistan and India escalated in recent weeks after India’s Parliament voted to remove the special status of the Muslim-dominated Jammu and Kashmir province, over which the two countries have already fought three wars. In retaliation, Pakistan has suspended all trade with India. While the economic impact at present is muted, a further escalation could hurt investor confidence and investment.

Pakistan Economic Growth

Economic growth in FY 2020 is likely to remain lackluster as Pakistan’s large twin deficits require fiscal austerity. Meanwhile, elevated inflation and tighter monetary conditions will likely dampen private consumption and investment. Exposure to external shocks, substantial financing needs and a further deterioration in relations with India represent key risks to the outlook. Our panelists see growth of 3.1% in FY 2020, which is down 0.4 percentage points from last month’s estimate, and 4.0% in FY 2021.

Pakistan Economy Data

	2013	2014	2015	2016	2017
Population (million)	183	186	190	194	197
GDP per capita (USD)	1,267	1,314	1,426	1,440	1,545
GDP (USD bn)	231	245	271	279	305
Economic Growth (GDP, annual variation in %)	3.7	4.1	4.1	4.6	5.2
Consumption (annual variation in %)	2.1	5.6	2.9	7.6	8.5
Investment (annual variation in %)	2.6	2.5	15.8	7.5	10.3
Industrial Production (annual variation in %)	0.8	4.5	5.2	5.7	4.6
Unemployment Rate	6.0	6.0	5.9	6.0	6.0
Fiscal Balance (% of GDP)	-8.0	-5.5	-5.3	-4.6	-5.8
Public Debt (% of GDP)	62.6	62.7	61.8	65.5	65.1
Money (annual variation in %)	16.9	12.6	12.8	14.5	13.9
Inflation Rate (CPI, annual variation in %, eop)	9.2	4.3	3.2	3.7	4.6
Inflation Rate (CPI, annual variation in %)	7.7	7.2	2.5	3.8	4.1
Exchange Rate (vs USD)	105.4	100.8	104.9	104.4	110.7
Policy Interest Rate (%)	9.00	10.00	6.50	5.75	5.75
Exchange Rate (vs USD, aop)	101.5	101.0	102.8	104.7	105.3
Current Account (% of GDP)	-1.1	-1.3	-1.0	-1.7	-4.1
Current Account Balance (USD bn)	-2.5	-3.1	-2.8	-4.9	-12.6
Trade Balance (USD billion)	-15.4	-16.6	-17.3	-19.3	-26.7
Exports (USD billion)	24.8	25.1	24.1	22.0	22.0
Imports (USD billion)	40.2	41.7	41.4	41.3	48.7
Exports (annual variation in %)	0.3	1.1	-3.9	-8.8	0.1
Imports (annual variation in %)	-0.5	3.8	-0.7	-0.2	18.0
International Reserves (USD)	8.5	11.8	16.0	20.9	18.7
External Debt (% of GDP)	26.3	26.7	24.1	26.5	27.4

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Pakistan Facts

	Value	Change	Date
Bond Yield	13.26	0.0 %	Sep 04
Exchange Rate	156.8	-0.05 %	Sep 04

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