ranking 41, World Bank 2015)
||188.9 million (World ranking
6, World Bank 2015)
|Form of state
||Mohammad Nawaz SHARIF
||2018, presidential and legislative
- Large domestic market
- Despite often strained relations, support remains
available from the US and multilateral agencies (IMF)
- Strong hard currency remittances
- Susceptibility to natural disasters and dependence on
- More frequent protests since the summer 2014
- Poor domestic and regional security (border with
- Low per capita income and high poverty levels
- Large fiscal and trade account deficits
- Weak business environment
Solid growth amid high vulnerabilities
GDP growth is forecast to rise by 4.8% in the financial year 2016-17.
Exports will grow at a slow pace. Reasons include low cotton and rice prices,
limited demand in partner economies, and deteriorated price competitiveness
Domestic demand growth will remain firm. It should benefit from cheap oil
prices and solid remittances inflows. Investment growth may pick up gradually
with robust credit growth and solid Foreign Direct Investment (FDI) inflows
related to the China-Pakistan Economic Corridor project.
In the short run, risks are elevated. First, an appreciation of the real
exchange rate could further hinder price competitiveness. Second, weaker
economic prospects in China and the GCC could result in lower FDIs and
remittances. Third, tighter global financing conditions could translate into
lower capital inflows. Fourth, a rise in oil prices would undermine the
external position. In the longer term, external vulnerabilities, political and
security uncertainties may contribute to weaker growth prospects.
Policy buffers are up but from a low base
The monetary policy framework is improving. In 2015, the National Assembly
passed legislation that enhances the State Bank of Pakistan’s independence.
Positive signs also include inflation being in check - it now stands below the
6% target - and a planned move towards an inflation targeting framework.
Public finances and the external position are improving but are still
vulnerable. Progress on reducing macroeconomic imbalances is scrutinized by the
IMF. Fiscal indicators have improved but are still at critical levels, with the
public deficit above -3% of GDP and public debt above 60% of GDP. The external
position has strengthened, with increased FX reserves providing now 4.3 months
of imports (FY2015-16). The current account balance improved thanks to lower
imports and higher remittances.
Weak business environment, political
vulnerabilities hinder the outlook
A poor business environment and a difficult political landscape might deter
investors. The World Bank’s Doing Business 2016 survey ranks Pakistan 138th out
of 189 economies. The country’s specific weaknesses include the tax
environment, contract enforcement, and adequate power supply.
Political stability remains fragile. The current government is ridden by
corruption scandals, a fragmented political scene, security issues, and uneasy
relations with neighboring countries (e.g. India, Afghanistan).
Last review: 09/26/2016