Whither Econ­omy?

Enterprise - - Front Page -

How the Pak­istani econ­omy will fare is be­ing ex­pressed by var­i­ous stake­hold­ers, but a ma­jor­ity expects the pri­vate sec­tor- driven growth of 5pc this fis­cal year. How­ever, there is a con­sen­sus that eco­nomic out­look for cal­en­der year 2015 hinges on the im­prove­ment of the en­ergy sup­ply and the se­cu­rity sit­u­a­tion.

The fall­ing petroleum prod­uct prices and pos­si­bly cheaper bank credit are ex­pected to cut pro­duc­tion costs and yield bet­ter mar­gins, which may en­er­gise the pri­vate sec­tor. The low in­fla­tion is ex­pected to in­crease the real in­come of the com­mon cit­i­zen stuck with static wages. This will sup­ple­ment the al­ready strong con­sumer de­mand in the coun­try, incentivising con­sumer goods pro­duc­ers to ex­pand their op­er­a­tions and pro­duc­tion.

How­ever, no sig­nif­i­cant im­prove­ment is ex­pected in 2015 in the qual­ity of growth, as the gov­ern­ment in­tends to di­vert Rs00bn from the de­vel­op­ment spend­ing to fi­nance new se­cu­rity ini­tia­tives. The gov­ern­ment is us­ing pro­vin­cial bud­get sur­pluses to mod­er­ate the high fis­cal deficit. And the pri­vate sec­tor is too nar­rowly fo­cused on mak­ing their busi­nesses suc­cess­ful, to care for the over­all macro im­pact.

The cut in de­vel­op­ment spend­ing in emerg­ing economies like Pak­istan tends to deepen so­cial, re­gional and house­hold dis­par­i­ties. The PML-N’s fix­a­tion with projects like glit­tery metro buses mo­tor­ways will eat up what­ever lit­tle is avail­able to im­prove so­cial spend­ing for the ben­e­fit of the 40pc of the pop­u­la­tion that can’t af­ford to avail them.

No ex­pan­sion is ex­pected in 2015 in the health and ed­u­ca­tion cover or the ac­cess of wa­ter and power to the coun­try’s vul­ner­a­ble pop­u­la­tion.

But the as­set fund man­ager and bro­ker com­mu­nity beats the of­fi­cial­dom in the lat­ter’s en­thu­si­asm for the emerg­ing eco­nomic out­look. They were the most op­ti­mistic of a dozen stake­hold­ers con­tacted for feed­back. Econ­o­mists and civil so­ci­ety ac­tivists were gen­er­ally pes­simistic, spell­ing doom and gloom if Pe­shawar tragedy is re­peated.

The rep­re­sen­ta­tives of lo­cal and in­ter­na­tional busi­nesses were cau­tiously op­ti­mistic. They pro­jected ac­cel­er­a­tion in GDP growth by about 1pc, from the cur­rent 4.1pc to 5.1pc in FY2015. Their opin­ion was

sec­onded by re­cent com­ments by key in­sti­tu­tional donors such as the Asian De­vel­op­ment Bank.

Asad Ja­far, pres­i­dent of the Over­seas In­vestors Cham­ber of Com­merce and Industry (OICCI), be­lieves that the busi­ness en­vi­ron­ment might take longer to be­come more at­trac­tive for new for­eign in­vestors. But he expects con­sumer prod­uct com­pa­nies like Nes­tle, Unilever, P& G etc to lead manufacturing in 2015.

He ranked en­ergy-re­lated com­pa­nies, tex­tiles, in­fras­truc­ture and oil com­pa­nies, in that or­der, to do bet­ter in the year ahead.

“The fun­da­men­tals are strong and the coun­try, with all its weak­nesses, proved to be a good des­ti­na­tion for op­er­a­tional multi­na­tional com­pa­nies. The fact is that most cor­po­rate vis­i­tors are pleas­antly sur­prised once they ar­rive in Pak­istan and find it way bet­ter than its im­age,” he com­mented.

How­ever, his rank­ing of the most promis­ing sec­tors clashed with a more con­ser­va­tive of­fi­cial of the fed­eral min­istry of in­dus­tries. A se­nior in­sider ad­mit­ted that a sys­tem­atic study has not been un­der­taken to eval­u­ate the po­ten­tial of dif­fer­ent in­dus­trial sec­tors and their ex­pected per­for­mance. He placed tex­tiles at the top, fol­lowed by pharmaceuticals, fer­tiliser, sugar and ce­ment sec­tors, with­out giv­ing out much to sub­stan­ti­ate the or­der of the rank­ing.

Former fi­nance min­is­ter Dr Hafiz Pasha sounded wor­ried. “A re­peat of the Pe­shawar tragedy can lead to a ma­jor with­drawal of for­eign in­vestors from the cap­i­tal mar­ket, and the coun­try can again land in a 2008- like sit­u­a­tion when foot­loose for­eign in­vestors pulled out, let­ting the mar­ket crash,” he told Dawn over phone.

He hoped that the gov­ern­ment would suc­ceed in rein­ing in the spec­tre. On the po­ten­tial of sec­tors in cal­en­der year 2015, he fore­casts 4- 5pc growth in agri­cul­ture on the back of a bumper wheat crop and mod­est growth in cot­ton out­put. He did not fore­see a re­ver­sal in the trend of stag­na­tion in manufacturing any­time soon. Min­ing and quar­ry­ing would grow, but chop­ping of the PSDP will hold back con­struc­tion from boom­ing, he said. In the ser­vices sec­tor, Dr Pasha fore­sees growth in defence.

He ex­pected the fis­cal deficit to es­ca­late as the gov­ern­ment will be again re­quired to re­tire cir­cu­lar debt at some point in 2015. The bal­ance of pay­ments will get a cush­ion be­cause of re­duc­tion in the oil bill, he said.

Most an­a­lysts painted a rosy pic­ture and men­tioned Pak­istan as the third best per­form­ing cap­i­tal mar­ket sev­eral times. Muham­mad Sohail, CEO of Topline Se­cu­ri­ties, sees great prom­ise in 2015 as the gov­ern­ment moves ahead with the re­form agenda, and as en­ergy projects come on line, credit cost is low­ered and the oil price wind­fall is man­aged pru­dently.

He placed the financial sec­tor at the top in terms of growth po­ten­tial, fol­lowed by power-re­lated com­pa­nies, IT and telecom­mu­ni­ca­tion com­pa­nies, fast mov­ing con­sumer goods com­pa­nies and auto man­u­fac­tur­ers.

He be­lieved that an eas­ing of the en­ergy cri­sis will re­vive sev­eral small and medium-sized com­pa­nies op­er­at­ing be­low ca­pac­ity be­cause of the en­ergy crunch.

“Th­ese folks sell op­ti­mism to their clients and get into the habit of ex­ag­ger­at­ing the pos­i­tives,” an econ­o­mist- turned- civil- rights ac­tivist com­mented.

“Much will de­pend on the eco­nomic gov­er­nance of the gov­ern­ment. In­stead of re­ly­ing on cre­ative ac­count­ing, ex­ter­nal in­flows and pop­ulist projects, the gov­ern­ment must de­volve author­ity and re­spon­si­bil­ity, and de­sist the temp­ta­tion to cut de­vel­op­ment spend­ing to put the econ­omy on fast-paced de­vel­op­ment,” con­cluded an­other econ­o­mist.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.