This document summarizes an economic outlook presentation given by Sakib Sherani. It discusses the major impacts of the COVID-19 pandemic on the global and Pakistani economies. Globally, a recession is expected due to fear, uncertainty, and supply chain disruptions. For Pakistan, exports, remittances, and government revenues are expected to decline, though lower oil prices may provide some offset. The presentation forecasts negative GDP growth of 1.5-0.0% for FY2020-21 and recovery to 3.0-4.0% growth in FY2021-22, along with higher fiscal deficits and inflation declining to 7%. Key business risks and opportunities in Pakistan are also outlined.

1. Economic Outlook
CFA Society I April 2020
Sakib Sherani
Ex-Member, Prime Minister’s Economic Advisory Council
Founder & CEO Macro Economic Insights

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The contents of this presentation are privileged. All information and analysis presented, unless explicitly
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3. Presentation Outline
 Global shock
 Likely outcomes
 Economic outlook
 Business risks + opportunities
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SAKIB SHERANI / MEI

4.  Global shock
 Likely outcomes
 Economic outlook
 Business opportunities
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5. Global
 Uncharted territory
 Fear, uncertainty, disruption on unprecedented scale
 Compounded pre-existing worries
 Global economic slowdown/recession fears
 Impact of China-US trade war
 China’s slowdown
 OPEC+ agreement collapse
 ‘Risk off’ environment/flight to safety
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6. 6
Source: worlduncertaintyindex.com
Source: Yahoo finance
10 yr UST yield

7. 7
Source: CNBC
Source: CNN Money

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“High uncertainty historically coincides with periods of
lower growth and tighter financial conditions.”

9. Global
 Policy stimulus in pipeline
 But some countries/regions will be constrained (esp.
Eurozone)
 A global ‘recession’ is inevitable …
 Key question: duration + magnitude
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10. ‘What will normal look like?’ While no one can say how long
the crisis will last, what we find on the other side will not look
like the normal of recent years. McKinsey & Co.
The best-case scenario would be a downturn that is more
severe than the GFC … but shorter-lived.
[However] the risk of a new Great Depression, worse than the
original – a Greater Depression – is rising by the day.
Nouriel Roubini
This is an economic tsunami. Mark Zandi
[chief economist, Moody’s Analytics]
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11. Impact on Global Economy
 Bloomberg Economics estimate:
Severity Global GDP impact
Moderate - 0.8 %
Severe - 1.9 %
Global pandemic* - 4.8 %
* Worst case, World Bank (2014)
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12.  Global shock
 Likely outcomes
 Economic outlook
 Business risks + opportunities
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13. Economy’s path will follow that of ‘health’
 Growth of new transmission complexes and evidence
of seasonality
 Impact of physical-distancing measures
 Efficacy of health-system surge
 Readiness of the health system to navigate recurrence
 Emergence of herd immunity, and:
 Discovery of vaccine
Adapted from McKinsey & Co.
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14. Pakistan
 High degree of vulnerability to contagion
 Low surveillance, screening + testing, contact-tracing etc.
capacity
 Cultural factors:
̶ Handshakes + greeting hugs
̶ Congregational prayer etc.
̶ Apathy
̶ Lack of mass awareness
 Partial lockdown
‘Patient 31’
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15.  Some epidemiological models predict 2-3 peaks
 However, bottom-line: disruption/fear aside,
longer lasting impact to come from global
conditions
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16.  Global shock
 Likely outcomes
 Economic outlook
 Business risks + opportunities
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17. Pakistan vs Advanced Economies
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18. Pakistan
 Channels of impact:
 +ve:
̶ Lower oil prices
̶ Dis-inflation
̶ Lower interest rates
̶ Fiscal space to govt.
= Growth-supportive impact
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19. Pakistan
 Channels of impact:
 +ve:
̶ Lower oil prices
̶ Dis-inflation
̶ Lower interest rates
̶ Fiscal space to govt.
= Growth-supportive impact
• However, positive impact will be limited by low confidence,
high disruption + uncertainty, & fiscal consolidation
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20. Pakistan
 Channels of impact:
 -ve:
̶ Lower exports
̶ Pressure on govt. revenue
̶ Potential pressure on remittances
̶ ‘Hot money’ + equity outflows
̶ Access to int’l capital?
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21. Working assumptions
Base case/Central scenario (global):
 Fear, anxiety to persist/return
 1st peak is followed by a 2nd (smaller) one this year
 Consumer + capital spending to remain depressed
 Supply chain, logistics, marketing channels disruption
 Global bankruptcies
 Sovereign + corporate debt work outs
 Credit channel disrupted
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22. Working assumptions
Base case/Central scenario (Pakistan):
 SARS-CoV-2/Covid-19: 2-3 episodes of local resurgence
 Rolling ‘lockdowns’
 Exports remain affected till Q3 2020
 Agriculture sector un-impacted
 Consumer + capital spending to remain depressed
 Enhanced multilateral emergency assistance + bilateral debt
relief
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23. Pakistan
 Main assumptions:
2020 2021
Oil price (Brent) US$ 25  25
Exports - 13%  - 17%
Remittances - 5%  - 20%
Saudi oil facility continues discontinued
Exceptional assistance (WB etc.) US$ 3 b US$ 3 b
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24. Forecasts Summary
Actual: Forecast:
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Bias
Real GDP growth % Y/Y 5.4 5.2 3.3 0.5-1.5 -1.5-0.0 3.0-4.0
Inflation (CPI)
End
June, %
3.9 5.2 8.9 8.0 7.0 7.0
Fiscal deficit % GDP 4.7 6.6 8.9 7.7 7.2 6.5
Ext. current a/c US$ bn -12.6 -19.9 -13.6 -5.7 -6.1 -8.4
Overall balance US$ bn … -6.0 -9.5 -2.5 3.9 0.7
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Data: SBP; IMF
Forecasts: Sakib Sherani/MEI
Macro Economic INSIGHTS
SAKIB SHERANI / MEI

25. Impulse Response Function
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FY21 f
FY22 f

26.  Global shock
 Likely outcomes
 Economic outlook
 Business risks + opportunities
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27. Lending at-risk:
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 Govt./public sector:
Very high likelihood of Paris/London Club process
 Exporters of T&C to US:
Prolonged disruption likely, leading to liquidity/solvency issues
 Consumer discretionary:
Autos, appliances, suppliers [steel, motors, tyres etc.]
 Travel/tourism/leisure
 Oil & gas
 Renewables?
 IPPs
Govt revenue will be under severe strain
 Financial counter-parties with high exposure to at-risk segments

28. Potential opportunities:
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 Healthcare sector
Pharma, medical devices, PPE, health technology
 Construction
Beyond short term
 Sectors with petroleum/petro-chemical inputs
Petro-chemicals, plastics, fertiliser, solvents/dyes, paints, pharma
 Start-up/new airlines
Acquisition + possible funding cost advantage
 Logistics
Supply chain management etc.
 On-line platforms / Telcos
Learning, tele-medicine, business support, E-commerce

29.  Thank You 
Q&A follows
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