Country Forecast Pakistan December 2017 Updater

Country Forecast Pakistan December 2017 Updater

  • December 2017 •
  • Report ID: 359021 •
  • Format: PDF


  • The Economist Intelligence Unit expects the Pakistan Muslim League (Nawaz), or PML (N), to retain control of the National Assembly (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 post ahead of the 2018 election.
  • 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 long 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 will 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 PRs105.1:US$1 on average in 2017 to PRs123.9: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. We expect the current-account deficit to average the equivalent of 4.4% of GDP annually in 2018-22. However, we do not believe that Pakistan will seek an IMF support package in this period.


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