Country Forecast Pakistan October 2017 Updater

Country Forecast Pakistan October 2017 Updater

  • October 2017 •
  • Report ID: 325728

  • The Economist Intelligence Unit expects the Pakistan Muslim League (Nawaz), or PML (N), to retain control of the National Assembly (NA, the lower house of parliament) until the next parliamentary election, which is due in 2018.
  • Shahid Khaqan Abbasi was elected as prime minister in August 2017 and will oversee the government's affairs for the remainder of the current government's term. However, the PML (N) is likely to select Shehbaz Sharif as its candidate for the premiership ahead of the 2018 poll.
  • The military will continue to play a dominant role in the country's politics, particularly on issues relating to domestic security, foreign policy and the China-Pakistan Economic Corridor (CPEC). We do not expect the military to replace the government, as its key interests are not threatened.
  • The parlous security situation will remain a key source of instability in 2018-22. It will undermine growth by posing operational and strategic challenges to infrastructure projects, while tarnishing Pakistan's investor appeal.
  • Relations between India and Pakistan will remain fractious and prone to setbacks in 2018-22. Meanwhile, China will remain Pakistan's leading economic partner and strengthen transport links and energy infrastructure.
  • We forecast that the fiscal deficit will average the equivalent of 5.1% of GDP in fiscal years 2017/18-2021/22 (July-June). The need to provide adequate funding for transport and energy projects under the umbrella of the CPEC, as well as high spending on security, will add significantly to spending pressure.
  • In 2017/18-2021/22 real GDP will grow at an average annual rate of 5.1%. Infrastructure investment and consumption will drive this expansion, but the poor business environment and structural impediments will weigh on growth.
  • A consistently high inflation differential with the US and a widening trade deficit mean that the Pakistan rupee will depreciate against the US dollar, from PRs105.2:US$1 on average in 2017 to PRs123.3:US$1 in 2022.
  • We expect the merchandise trade deficit to widen over the forecast period as a result of greater demand for imported investment goods and recovering global oil prices, to reach US$34.8bn in 2022. We expect the current account to remain in the red throughout the forecast period, with the shortfall averaging the equivalent of 4.2% of GDP over 2018-22.


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Country=Pakistan Date=201710 Publisher=TheEconomistIntelligenceUnit Price=1000