17 predictions for Pakistan’s economy in 2017

[Devil Soul]

17 predictions for Pakistan’s economy in 2017
By Wali Zahid
Published: January 17, 2017
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PM Nawaz gestures at supporters. PHOTO: PML-N

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.

WEF report: Pakistan leaves India behind in IDI

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.

Over 78% American companies say willing to invest more in Pakistan

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.

Chinese firms willing to invest in Pakistan

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

 

[Hyde]

Foreign reserves will go back to 16 billion dollars unless our exports picks up once again

Gdp growth will also be above 5% or more

FDI in auto industry but not much in energy sector besides Chinese investment

 

[PakistaniNawab]

We need to sort out our debt.

 

[hussain0216]

Its a slow process

But consider it like a hill, we were and are going up hill and progress is slow but increasingly promising

Once we reach the peak and head down hill it will be like a dam bursting, progress will be fast and growth snd change will come quickly

We have a 200 million population in need of everything everything from the Auto industry to energy has enormous growth potential


Investors will seek out potential to make money
Our situation has held us back
Even the Americans thought we would collapse and be a failed state and this was known so why would you invest in Pakistan
We have however turned this around and if we keep on the growth path however slow
It will lead to a breakthrough moment in Pakistani history yo which we could point to in years gone by as the point where Pakistan really took off snd emerged onto the world market.


I feel its close another few years maybe

 

[Valar Dohaeris]

Why the debt will keep increasing ?

 

[Hyde]

Why the debt will keep increasing ?

You need debt to finance projects

For example we are talking about upgrading Karachi-Peshawar ML-1 costing $8 billion dollars. China agreed to fund $5.5 billion dollars and ADB agreed to finance $2.5 Billion dollars. The point is media will cry qarzay barh rahay hain aur 2.6 billion ADB se aur le liya...

But without qarzay we cannot progress as our capacity to fund such projects from internal resources are close to none. I am not even talking about the proposed railway projects of upgrading ML-II, ML-III and new links from Gwadar to Karachi and Gwadar to Peshawar via Basima-Quetta/Jacobabad and DI Khan costing tens of billions of dollars. Its more qarzay but if we notice the distance from Gwadar to Quetta reduces from 40 hours to just 8 hour by train, its a big relief for the people of Balochistan who doesn't have to travel thousands of kilometres via Sindh in order to travel inter-city and can reach the destination by travelling few hundred kilometres saving in massive amount of fuel and efficiency.

 

[xyxmt]

Foreign reserves will go back to 16 billion dollars unless our exports picks up once again

Gdp growth will also be above 5% or more

FDI in auto industry but not much in energy sector besides Chinese investment

no it wont because Export + remittance is still greater than imports and that is the reason for growing Forex

 

[Hyde]

no it wont because Export + remittance is still greater than imports and that is the reason for growing Forex

Could you prove it with evidence?

 

[xyxmt]

Could you prove it with the evidence?

lets say you have 0 dollars, then you sell something for 100 dollars and you brother gives you 100 dollars more. You buy 150 dollars worth of groceries....what have you left in your pocket now?? 50 dollars, thats your forex.

Now either your brother stop giving you 100/month or you buy more than 200/month, your saving will keep growing

 

[Hyde]

lets say you have 0 dollars, then you sell something for 100 dollars and you brother gives you 100 dollars more. You buy 150 dollars worth of groceries....what have you left in your pocket now?? 50 dollars, thats your forex

Is this an evidence?

Can you please provide evidence from the statistics?

Pakistan's imports = ?
Pakistan's Exports = ?
Foreign Remittances = ?

How do you claim that the Foreign reserves will not decrease that are aided by budget-supported loans and we are likely to start repaying from this year.

PS: Pakistan's total imports are higher than Exports and remittances so I guess you didn't read the stats well enough. Pakistan is also likely to pay back IMF so billions of dollars will vanish from the foreign reserves. The only way we can sustain the foreign reserves is by increasing exports or Foreign Direct Investment which isn't coming right now

 

[xyxmt]

Is this an evidence?

Can you please provide evidence from the statistics?

Pakistan's imports = ?
Pakistan's Exports = ?
Foreign Remittances = ?

How do you claim that the Foreign reserves will not decrease that are aided by budget-supported loans and we are likely to start repaying from this year.

PS: Pakistan's total imports are higher than Exports and remittances so I guess you didn't read the stats well enough. Pakistan is also likely to pay back IMF so billions of dollars will vanish from the foreign reserves. The only way we can sustain the foreign reserves is by increasing exports or Foreign Direct Investment which isn't coming right now

because official figures only count for what comes thru banking system. do you think remittances are only 20 billion? no a lot comes thru hawala and brought in by people themselves and sent thru relatives, millions of Pakistani living in middle east, Europe, and north America visit Pakistan (when I visit Pakistan for a two week trips i must have at least $1000 per family person spending money and no official figure counts that money), there are 100s of money exchangers in Karachi and whenever i go to one there are people standing in line. State Bank mops up billions of dollars from open market every year something that doesnt show on books and go towards your undocumented defense spendings.

 

[Hyde]

because official figures only count for what comes thru banking system. do you think remittances are not 20 billion? no a lot comes thru hawala and brought in by people themselves and sent thru relatives, millions of Pakistani living in middle east, Europe, and north America visit Pakistan (when I visit Pakistan for a two week trips i must have at least $1000 per family person spending money not official figure counts that money), there are 100s of money exchangers in Karachi and whenever i go to one there are people standing in line. .

such money is never accounted... which means its got nothing to do with foreign reserves.. in another words our foreign reserves will go down as the government have to repay IMF and to support negative balance of payment.

 

[Meengla]

You need debt to finance projects

For example we are talking about upgrading Karachi-Peshawar ML-1 costing $8 billion dollars. China agreed to fund $5.5 billion dollars and ADB agreed to finance $2.5 Billion dollars. The point is media will cry qarzay barh rahay hain aur 2.6 billion ADB se aur le liya....

Okay, firstly, please realize I am very novice about financial matters, and now my question: Why is foreign funding/external loans needed for such projects? Why not employ local labor and pay them via Pak Rupees and similarly buy all the material from local suppliers and pay them via Rupees? Is that because the material are not available locally?

 

[Hyde]

Okay, firstly, please realize I am very novice about financial matters, and now my question: Why is foreign funding/external loans needed for such projects? Why not employ local labor and pay them via Pak Rupees and similarly buy all the material from local suppliers and pay them via Rupees? Is that because the material are not available locally?

In that case the government will be borrowing money from the local banks and we already over-do that. Pakistan's internal debt is higher than external debt already. Money does not grow on trees you know, you have to earn it somehow, even the government needs sources of income as they cannot just print piece of paper and keep everybody happy.

You are right about buying material from abroad as well, we need to import heavy machinery, plants and tools from other nations in such projects and besides cheap labour, cement and some raw material there is hardly anything that we produce in Pakistan

 

[xyxmt]

such money is never accounted... which means its got nothing to do with foreign reserves.. in another words our foreign reserves will go down as the government have to repay IMF and to support negative balance of payment.

yes it pays for undocumented things. do you really think your defense budget is whats on the books, you cant maintain sixth largest economy with your budgetary allocations. since i dont run Pakistani finances so i dont have exact figures i can only guess based on little knowledge I have...how else do you think your forex kept going up while exports are down and imports are up for last 10 or so years

It helps to have a book cook (CA) as your finance minister

In that case the government will be borrowing money from the local banks and we already over-do that. Pakistan's internal debt is higher than external debt already. Money does not grow on trees you know, you have to earn it somehow, even the government needs sources of income as they cannot just print piece of paper and keep everybody happy.

borrowing from local banks in local currency doesnt effect forex, it does effect the value of your currency though