KARACHI: Serious concerns have been raised over Pakistan economy going frombad to worst in coming years against the government tall claims.
Pakistan’s government expects the economy will grow at the fastest pace inmore than a decade in the coming fiscal year, but economists are doubtful,Bloomberg reported on Monday.
Standard Chartered Plc, Elixir Securities Pakistan Pvt. and BMA CapitalManagement Ltd. are among those that have downgraded growth forecasts,betting on a slowdown for the first time in six years.
Growth in South Asia’s second-largest economy is set to ease to 5.2 percentin the year starting July, according to the average of six economistssurveyed by Bloomberg. That compares with the government’s estimate of 6.2percent, and is slower than the 5.8 percent pace a year earlier. Theprojected slowdown comes as the government scales back plans for spendingon roads and infrastructure to meet fiscal targets – key to winningfinancial support from the International Monetary Fund. “Pakistan’s economycan’t grow faster anymore with the external imbalances,” said Hamad Aslam,research director at Elixir Securities Pakistan Pvt. There is also“increased conviction on Pakistan entering an IMF program later this yearthat will focus on controlling the deficit over growth.”
The economy has gone from bad to worse before elections. The nation’sdollar reserves have dropped at the fastest pace in Asia and itscurrent-account deficit widened 50 percent this year. Authorities have alsodevalued the currency twice since December. There are risks to consumer andinvestor sentiment from the growing current account gap, Bilal Khan, asenior economist at Standard Chartered, wrote in a report in March. Tightermonetary and fiscal policy and a weaker rupee are needed to narrow that gap.
“Policy makers have been able to avoid such policy steps so far due torelatively easy financing from the capital markets,” wrote Khan. “This mayface challenges over the course of 2018.”
The benchmark KSE 100 Index has dropped 6 percent since its peak in Aprilas economic pressures build up ahead of elections. The stock market was theworst performer globally last year, according to 95 indexes tracked byBloomberg.