Pakistan Economy: All good things come to an end
- Economic Survey 2018-19 rolled out by the PTI gov’t shows a weak economic landscape for FY19 (provisional, spanning July-May’19), with the gov’t missing all major targets including GDP growth, inflation, revenue collection, budget deficit, savings and investments by a wide margin.
- FY19 marks an end to the late upcycle, where economic growth hit a nine-year low at 3.3%YoY compared to 5.5% in FY18, missing an overly ambitious target of 6.2%, expectedly out-of-place in a year of numerous transitions.
- This ongoing economic slowdown is primarily a consequence of (drastic, but warranted) stabilization measures undertaken by policy makers to arrest widening macro-imbalances (i.e. CAD and fiscal deficit).
- Sector-wise, all major macro constituents considerably underperformed, with agriculture, industrial and services sectors registering paltry growth of 0.85%YoY, 1.4%YoY and 4.7%YoY against respective targets of 3.8%YoY, 7.6%YoY and 6.5%YoY.
- While macro-adjustments undertaken so far have brought some stability, we believe persistent policy measures (along similar lines) are required to subdue chronic deficits to manageable territory.
- We highlight Budget FY20 as a key checkpoint in assessing both the authorities’ will to continue prescribed reforms (dictated to various degrees by the IMF) to address chronic deficits and the impact of fiscal consolidation on economic outlook (i.e. growth, inflation and interest rates).
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