Pakistan Business Forecast Report Q1 2011
by ReportLinker.com on Dec 07, 2010
- 429 views
Flood Damage Exacerbates EconomicConcernsPakistan's precarious economic outlook was dealt a further blow inAugust 2010 by the worst flooding in the country's history. The disastersaw at least 20mn ...
Flood Damage Exacerbates EconomicConcernsPakistan's precarious economic outlook was dealt a further blow inAugust 2010 by the worst flooding in the country's history. The disastersaw at least 20mn people displaced (with at least 6mn in needof emergency assistance), causing massive damage to infrastructureand agricultural output. With the economy already having shown signsof deceleration before the crisis, we believe that stagflation (ie risingconsumer prices, subdued growth) is a major concern as we head into2011, and have revised our macroeconomic assumptions accordingly.Meanwhile, the government's slow response to emergency relief hasadded to its unpopularity. With security still a major headache and thePrime Minister Asif Ali Zardari also facing a stand-off with the country'sjudiciary, Pakistan's overall country risk profile is weaker than ever.R ising inflation and unemployment following the flood disaster inAugust will add to the woes of a poor security environment andpopular distrust in the government. Meanwhile, tense relations withIndia remain a potential flashpoint. Although not our core scenario,such a volatile backdrop means that we cannot rule out a seriouschallenge to the executive (either constitutional or unconstitutional)in 2011. Pakistan's political risk profile languishes at the bottom ofour Asian league table, and by quite some distance. Unfortunately, ifanything, we are concerned that Pakistan could be on course to losefurther ground to its regional peers in the months ahead, reinforcingits status as a political hot spot in the emerging market universe.While the World Bank/Asian Development Bank initial evaluation ofPakistan's post-flood economy had not been published at the time ofwriting, our own damage assessment suggests that the country willstruggle to generate any meaningful real GDP growth in FY 10/11(July-June). Even after the clean-up operations are complete, weare unlikely to witness a return to the days of +5% economic growth(last seen between 2002 and 2007), as the government's poor fiscalhealth and a protracted internal struggle against extremist elementsweigh heavily on private sector demand.Pakistan's business environment remains weak and, therefore,ranks a lowly 114 out of 167 emerging markets in our businessenvironment ratings. This ranking places Pakistan between Mauritaniaand Nicaragua. Going forward, we believe that Pakistan'sbusiness environment will remain highly challenging, with the shakysecurity situation and a dire energy shortage continuing to weighon economic activity, particularly much-needed investment. Giventhe recent damage to infrastructure in the recent flooding ' and themassive clean-up costs necessary to get the economy back on itsfeet ' we believe that the country's investment appeal will remainunattractive for the foreseeable future.
- Total Views
- Views on SlideShare
- Embed Views