EUR 4.64 For Business Accounts Only

Pakistan Economy: Signs of growth intact; but worries on BOP

• SBP’s latest 2QCY16 report has expressed satisfaction over the state of the economy, with an accommodative monetary policy stance, increase in development spending, and substantial increase in lending to the private sector supporting the ongoing growth momentum. FY17’s GDP growth rate is set to surpass FY16’s level of 4.7%YoY.

• That said, concerns on the external front are becoming more prominent. Trade deficit has widened by 34%YoY, with bulk of the corporate expansion cycle yet to materialize and commodity prices still far off from historic peak levels. Remittances continue to slowdown; meanwhile, impact of recent rebound in commodity prices has not translated into higher export value.

• Fiscal side has remained under pressure as well (1H deficit up 70bps to 2.4% of GDP), with growth in tax revenue decelerating to 6%YoY in 1HFY17 (vs. growth of more than 20%YoY during the same period last year), and increase in government expenditure.