Broadly speaking, we are sticking with our modest projections for Pakistani port activity. Small adjustments have been made to account for new data releases and marginally stronger container traffic.
Despite Risks, Growth To Stay Around 4%
Pakistan's economy continues to show signs of promise amid the ongoing drawbacks of an energy crisis, systematic terrorist activity, and a high fiscal deficit, driven in part by the costs associated with the former. Investment spending, which has underperformed headline real GDP growth for several years, declining to around 15% of GDP at present, looks likely to accelerate over the coming years.
At present, Pakistan has the lowest investment rate in the whole of Asia, reflecting more than anything else the low national savings rate in the economy. Going forward, efforts undertaken by the government, with the assistance of the IMF, should help to boost the domestic savings rate, freeing up resources for investment. Investment is of particular importance to the shipping and ports sector, to allow capacity to keep up with demand and to improve competitiveness.
We forecast real GDP growth to come in at 4.0% in fiscal year 2014/15 (July-June). While this would mark a slight slowdown from the estimated 4.1% growth rate seen in FY2013/14, it is above the five-year compound annual rate, is occurring amid relatively benign inflation, and is coming at a time of relative fiscal austerity. This suggests to us that a 4.0% growth rate is sustainable over the coming years, and even faces upside risks. However, continued security concerns will act as a drag on investment, as well as keeping the budget balance firmly in deficit owing to elevated military spending.
Broadly speaking, we are holding our existing and modest projections for port activity. Small adjustments have been made to account for new data releases and marginally stronger container traffic.
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