Pakistan Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

Why you should buy this report

  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Pakistan Country Risk Report
Product Price
$1,195.00

Core Views:

  • A sharp drop in terrorist activity in 2015 is beginning to have positive effects on the Pakistani economy, following Islamabad's aggressive approach against terrorists based in the North Waziristan border region that were stepped up following the Peshawar military school attacks in December 2014. While significant challenges remain, a promising change in tack by the establishment may be in the offing, with the potential to provide more medium-term stability.

  • We forecast real GDP growth to come in at 4.3% in Fiscal Year 2015/16 and 4.2% in Fiscal Year 2016/17, helped by cheaper energy prices and an improved security situation. Pakistan's chronically low savings rate is finally beginning to increase, which will provide support for sustainable investment over the coming years.

  • The inflation cycle in Pakistan has likely turned and we expect the State Bank of Pakistan to begin hiking rates in mid-to-late 2016. That said, continued low oil prices will prevent the need for the central bank to hike aggressively, and we are forecasting just 50bps of hikes in the benchmark rate this year from the current multi-year low of 6.00%.

  • The decline in crude oil prices is having a dramatic positive impact on Pakistan's trade account. The trade deficit is narrowing despite a surge in the non-oil trade deficit, providing support to both economic growth and the country's international reserve buffer.

  • The Pakistani government remains broadly on course in its efforts to narrow the country's longstanding fiscal deficit, with the latest IMF loan disbursement testament to ongoing reform efforts. We continue to see the fiscal deficit narrowing over the coming years to 4.8% of GDP in Fiscal Year 2015/16 and 4.4% of GDP in Fiscal Year 2016/17.

  • Pakistan is winning international recognition for the development of its Islamic financial sector, and we continue to expect Shariah-compliant banking to grow in prominence over the coming years with the help of the authorities' push to grow the sector.

Major Forecast Changes

  • We have made a sizable revision to our forecast for Pakistan's current account, with the ongoing drop in oil prices likely to cause a healthy current account surplus of 1.2% of GDP in FY2015/16. This compares with a deficit of 1.0% in FY2014/15, and our previous forecast for a balanced current account position.

Key Risks

  • The recent improvement in the security situation, as shown by the sharp drop in civilian casualties since the start of 2015 poses an upside risk to the economic outlook. While it is too early to tell whether the reduction in casualties will be sustained, an improved security situation would certainly encourage increased investment inflows.

  • The Pakistani economy faces a sweet spot of being very exposed to global energy prices yet relatively shielded from global growth weakness, suggesting there is upside potential for growth from the ongoing decline in oil import costs.

Macroeconomic Forecasts (Pakistan 2014-2017)
Indicator 2014 2015e 2016f 2017f
National Sources/BMI
Real GDP growth, % y-o-y 4.0 4.2 4.3 4.2
Nominal GDP, USDbn 235.0 254.7 266.9 287.0
Consumer price inflation, % y-o-y, eop 8.2 3.8 5.5 6.0
Exchange rate PKR/USD, eop 100.52 104.90 108.05 111.29
Budget balance, % of GDP -5.5 -5.3 -4.8 -4.4
Current account balance, % of GDP -1.3 -1.0 1.2 1.0
Executive Summary
5
Core Views
5
Major Forecast Changes:
5
Key Risks To Outlook:
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Karachi Crackdown A Double-Edged Sword
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
9
Instability To Prevail, But Outright Collapse Unlikely
9
TABLE: SCENARIO MATRIX: EVOLUTION OF STATE
10
TABLE: SCENARIO MATRIX: CENTRIFUGAL VERSUS CENTRIPETAL FORCES
11
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Strong Manufacturing Potential
14
TABLE: ECONOMIC ACTIVITY
14
Monetary Policy
16
Rate Cut Should Help To Reignite Inflationary Pressures
16
TABLE: MONETARY POLICY
16
Fiscal Policy
18
Continued Progress Seeing Recognition
18
TABLE: FISCAL POLICY
18
TABLE: MAIN EXPENDITURE & REVENUE CATEGORIES
19
Exchange Rate Policy
19
PKR: Gradual Weakness Despite Terms Of Trade Gains
19
TABLE: CURRENCY FORECAST
20
TABLE: EXCHANGE RATE
20
Balance Of Payments
21
Headline Improvement Belies Underlying Weakness
21
TABLE: NET EXPORT & IMPORT PARTNERS
21
TABLE: MAIN IMPORTS & EXPORTS
22
Chapter 3: 10-Year Forecast
23
The Pakistani Economy To 2024
23
South Asia's Serial Underperformer
23
TABLE: LONG-TERM MACROECONOMIC FORECASTS
23
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
TABLE: OPERATIONAL RISK
26
Education
27
TABLE: ASIA - EDUCATION RISK
28
TABLE: GRADUATES OF TERTIARY EDUCATION ('000)
29
Government Intervention
31
TABLE: ASIA - GOVERNMENT INTERVENTION RISK
32
TABLE: INCOME TAX: NET TAXABLE INCOME (PKR) & TAX RATE
33
Chapter 5: BMI Global Macro Outlook
37
Global Outlook
37
Global Growth Weak As EMs Squeezed From All Sides
37
TABLE: GLOBAL ASSUMPTIONS
37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
39

Assess your risk exposure in Pakistan with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Pakistan with confidence.

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  • Delivery of the report in print, PDF and online formats
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