Macroeconomic Forecast Pakistan

BMI View: While there a signs of a tentative stabilisation in some key macroeconomic metrics such as the current fiscal accounts, the economy is clearly losing momentum, as evidenced in the deceleration in growth in FY2008/09 (July-June) to 2.0%. Large-scale manufacturing has been pummelled the hardest, with the sector shrinking by 7.7% in real terms last fiscal year. While services and agriculture have held up better, it is questionable whether they will be able to pull growth up to the government's 3.3% target for FY09/10 - our forecast stands at slightly more modest 2.5%. Encouragingly, inflation is subsiding, with the consumer and wholesale price indexes coming in at 13.1% y-o-y and 4.2%, respectively, in June. We currently forecast CPI to average 9.4% in FY09/10, and are not overly alarmed by recent downward pressures on the rupee.

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