Business Monitor International


Pakistan Country Risk Report

Published 28 January 2015 | Quarterly

  • 50 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Pakistan Country Risk Report

Core Views:

  • Increased political stability is likely to result from the December 16 Peshawar school attacks in the near term, as opposition politicians come together to look for ways to fight the growing terrorist threat. Over the longer term, the government has an opportunity to tackle terrorism from a grassroots level as it looks to implement a 20-part National Action Plan to combat the spread of extremism.

  • The Pakistani government's reform efforts are slowly bearing fruit, with efforts to reduce energy subsidies, broaden the tax base, and offload stakes in public sector enterprises all contributing to a substantially lower fiscal deficit in Fiscal Year 2013/14. We expect further progress in FY2014/15, which should see the fiscal deficit fall further to 5.1% of GDP.

  • Lower oil prices and the ongoing reduction in government borrowing should allow the State Bank of Pakistan (SBP) to lower interest rates further over the coming months, as headline consumer price inflation (CPI) falls further. We expect another 50 basis point interest rate cut by the SBP in early 2015, and are forecasting CPI to average 4.5% in both Fiscal Year 2014/15 (July-June) and FY2015/16.

  • Despite an improving current account position owing to a declining oil import bill, we believe that Pakistan's precarious reserve position will encourage the State Bank of Pakistan (SBP) to steer the rupee gradually weaker in order to build up a greater reserve buffer. The success of the government's privatisation drive, and progress on the crackdown on terrorism are also likely to be key drivers of the currency in 2015.

  • Increased co-operation between Islamabad and Beijing, particularly in the area of energy infrastructure, should provide strong support to investment growth in Pakistan over the coming years. We see real GDP growth coming in at 4.0% in Fiscal Year 2014/15, from 4.1% in FY2013/14.

  • The State Bank of Pakistan's increased efforts to boost the awareness of Islamic financial products...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestics Politics
8
Taking A Tougher Stance On Terror
8
Increased political stability is likely to result from the December 16 Peshawar school attacks in the near-term, as opposition politicians
Increased political stability is likely to result from the December 16 Peshawar school attacks in the near-term, as opposition politicians
come together to look for ways to fight the growing terrorist threat
Over the longer term, the government has an opportunity to tackle
terrorism from a grassroots level as it looks to implement a 20-part National Action Plan to combat the spread of extremism
Tab le: Politica l Overview
8
Long-Term Political Outlook
10
Instability To Prevail, But Outright Collapse Unlikely
10
Pakistan is at risk of experiencing years of instability and militant activity, but an outright collapse of the state is unlikely unless the core
Pakistan is at risk of experiencing years of instability and militant activity, but an outright collapse of the state is unlikely unless the core
province of Punjab becomes ungovernable
Meanwhile, due to its
strategic importance, Pakistan's foreign allies will do everything they can to ensure its stability
Tab le: SCENARIO MATRIX - EV OLUTION OF STATE-
10
Tab le: SCENARIO MATRIX - CENTRIFUGAL VER SUS CENTRIPETAL FORCES
11
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
China Assistance To Help Boost Investment
14
Increased co-operation between Islamabad and Beijing, particularly in the area of energy infrastructure, should provide strong support
Increased co-operation between Islamabad and Beijing, particularly in the area of energy infrastructure, should provide strong support
to investment growth in Pakistan over the coming years
1% in
FY13/14
Tab le: Economic Acti vity
14
Fiscal Policy
15
Reforms Bearing Fruit
15
The Pakistani government's reform efforts are slowly bearing fruit, with efforts to reduce energy subsidies, broaden the tax base, and
The Pakistani government's reform efforts are slowly bearing fruit, with efforts to reduce energy subsidies, broaden the tax base, and
offload stakes in public sector enterprises all contributing to a substantially lower fiscal deficit in FY2013/14
We expect further progress
in FY14/15, which should see the fiscal deficit fall further to 5
Tab le: Fisca l Policy
15
Monetary Policy
16
Further Rate Cuts Likely Amid Oil Collapse
16
Lower oil prices and the ongoing reduction in government borrowing should allow the State Bank of Pakistan (SBP) to lower interest
Lower oil prices and the ongoing reduction in government borrowing should allow the State Bank of Pakistan (SBP) to lower interest
rates further over the coming months, as headline consumer price inflation (CPI) falls further
We expect another 50 basis point interest
rate cut by the SBP in early 2015, and are forecasting CPI to average 4
Table: Monetary Policy
16
Exchange Rate Policy
18
PKR: Slight Depreciation In 2015
18
Despite an improving current account position owing to a declining oil import bill, we believe that Pakistan's precarious reserve position
Despite an improving current account position owing to a declining oil import bill, we believe that Pakistan's precarious reserve position
will encourage the State Bank of Pakistan to steer the rupee gradually weaker in order to build up a greater reserve buffer
The success
of the government's privatisation drive, and progress on the crackdown on terrorism are also likely to be key drivers of the currency in
of the government's privatisation drive, and progress on the crackdown on terrorism are also likely to be key drivers of the currency in
2015
table: Exchange Rate
18
Banking Sector
19
Shari'a Banking Push Continues
19
The State Bank of Pakistan's increased efforts to boost the awareness of Islamic financial products are likely to be successful in
The State Bank of Pakistan's increased efforts to boost the awareness of Islamic financial products are likely to be successful in
boosting shari'a-compliant finance to 20% of the total banking sector by 2020
This, together with a reduction in public sector crowding
out, should help arrest the steady decline in total banking assets as a share of GDP
Tab le: CURRENCY FORECAST
19
Chapter 3: 10-Year Forecast
21
The Pakistani Economy To 2024
21
South Asia's Serial Underperformer
21
Despite holding some of the hallmarks of an attractive emerging market growth story, Pakistan's economy has been stuck in a
Despite holding some of the hallmarks of an attractive emerging market growth story, Pakistan's economy has been stuck in a
secular growth downtrend for decades
This failure can largely been be put down to myopic government policies, a hostile business
environment, and acute security risks - three factors that are unlikely to change materially over the coming decade
For this reason,
we are forecasting a rather lacklustre 4
0% average annual expansion through to 2024, meaning that Pakistan will remain very much a
regional underperformer
Tab le: Long -Term Mac roeconomic Forecasts
21
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
Tab le: Operational Risk
26
Availability Of Labour
27
Table: Asia - Availabi lity Of Labour Risk
28
Crime Risk
31
Tab le: Asia - Crime Risk
32
Tab le: Crime Statistics
33
Chapter 5: Key Sectors
35
Autos
35
Table: Autos Total Market - Historical Data & Forecasts
35
Food & Drink
36
Table: Food Consumption Indicato rs - Historical Data & Forecasts
38
Table: Hot Drink Value/Volume Sales, Production & Trade - Historical Data & Forecasts
39
Table: Mass Grocery Retail Sales By Format -Historical Data & Forecasts
41
Other Key Sectors
43
Table: Oil & Gas Sector Key Indicators
43
Table: Pharma Sector Key Indicators
43
Table: Defence & Security Sector Key Indicators
43
Table: Telecoms Sector Key Indicators
44
Table: Infrastructure Sector Key Indicators
44
Table: Freight Key Indicators
44
Chapter 6: BMI Global Assumptions
45
Global Outlook
45
New Era For Oil
45
Table: Global Assumptions
45
Table: Developed States, Real GDP Growth , %
46
Table: BMI VER SUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
46
Table: Emerging Markets , Real GDP Growth, %
47

The Pakistan Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Pakistan. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Pakistan's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Pakistan's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Pakistan's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Pakistan, including currency volatility, the commodity price boom and protectionist policies.

The Pakistan Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Pakistan' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Pakistan through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Pakistan Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Pakistan and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Pakistan, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Pakistan over the next 5-years?

BMI's Pakistan country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Pakistan Market - Political Strengths, Weaknesses, Opportunities and Threats facing Pakistan.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Pakistan's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Pakistan’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Pakistan's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Pakistan?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Pakistan against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Pakistan’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Pakistan will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Pakistan's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

secure
Benefit from discounts when you add multiple products to your basket
2 Products SAVE 10%
3 Products SAVE 15%
4 Products SAVE 20%
5 Products SAVE 25%
6 Products SAVE 30%
7 - 20 Products SAVE 35%
21 Products or more SAVE 40%

Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express