As Pakistan continues its march from being a frontier economy to becoming an emerging market, 2017 may be the best year in the country’s 70-year-long history. From increase in foreign investment, creation of Export-Import Bank to likely changes in the auto industry, here’s what we predict will happen to Pakistan’s economy this year.
GDP growth: Although gross domestic product (GDP) growth forecasts by International Monetary Fund, World Bank and federal budget vary, Pakistan’s GDP is likely to grow by 4.7 per cent this year. The annual GDP may increase from $270 billion to around $300 billion and for the first time, the Purchasing Power Parity may cross the $1trillion mark. Pakistan is currently 40th largest economy in the world and our ranking may improve by a point or two.
Debt: National debt, currently at $73 billion, will continue to grow.
Debt-to-GDP ratio: Currently at 64.8 per cent, it may decline slightly.
Foreign exchange: Reserves will continue to be in the region of $23-24 billion.
Stock market: Pakistan will enter MSCI’s Emerging Markets category in May, meaning larger amounts will inflow. MSCI is a leading provider of international investment decision support tools. In 2016, Pakistan Stock Exchange (PSX) provided 46 per cent returns. KSE-100 benchmark index is also likely to cross 55,000 points from current nearly 48,000 points. Forty per cent stakes in PSX will go to Chinese consortium and this is likely to bring large institutional investors from other countries.
Retail: More large shopping malls will be built or become operational across major urban centres. Superstore chains will open new stores in unprecedented three-digit numbers.
Tax filers: Number of active tax payers/filers may reach 1.2 million.
Exports: Although IT exports are picking up, Pakistani exports will continue its declining trend, mostly because of poor cotton production, our low global competitiveness and travel advisories.
Export-Import Bank: The bank may be functional before June to facilitate exporters and importers after State Bank of Pakistan licenses it.
Foreign Direct Investment: FDI this year may cross the $1-billion mark.
Remittances: After a drop in 2016, remittances may pick up to reach $20billion mark.
Inflation: It may remain between four and five per cent as low oil prices are expected to stay stable.
Agriculture: Agriculture sector will continue to remain affected because of declining cotton production.
Finance: The sector will increase focus on financial inclusion, generating opportunities for micro-finance and commercial banks.
Banking: Smart banking, mobile banking and branchless banking will increase.
Ease of doing business index: Pakistan, at 144 out of 190 countries, was among top 10 global improvers in World Bank’s 2017 Doing Business rankings. In the 2018 ranking, it will improve further.
Auto industry: Pakistan may need additional 100,000 trucks to meet the CPEC-related material and freight transport needs and it is unlikely that this demand is planned and met in time. Demand for locally manufactured new and imported used cars will continue to rise. Although there’s interest from Volkswagen, Kia, Renault and Nissan for manufacturing plants in Pakistan, the production will not start this year which also means prices of cars will not come down as current producers – Toyota, Honda and Suzuki – remain in monopolistic situation.
Wali Zahid is a former journalist who now trains senior executives to improve workplace effectiveness