Pakistans Economy

Pakistans economy continued to pick up in Fiscal Year 2015 as economic reform proceeded
and security enhanced. Inflation noticeably declined, and the current deficit contracted with
favorable prices for oil and other commodities. In spite of global headwinds, the viewpoint is
for continuous modest growth as operational and macroeconomic reform expands.
Determination will be requisite to overcome long-lasting structural obstacles to investment
and empower faster progress.
Selected economic

2015

2016 Forecast

2017 Forecast

4.2
4.5
-1.0

4.5
3.2
-1.0

4.8
4.5
-1.2

indicators (%)
Pakistan
GDP Growth
Inflation
Current Account
Balance (share of
GDP)

Economic performance
GDP growth edged up to some extent to 4.2% in FY2015 (ended 30 June 2015) but
it was below the government target of 5.0%. Services prolonged by 5.0% and
endured the largest contributor to growth in FY2015, as agriculture and
manufacturing posted more modest gains. Growth in facilities was led by recovery in
finance and insurance that reflected higher profits and in general government
services, which prolonged on higher infrastructure spending and wages. Continued
energy shortages, slowing external demand, and base effect on food and fertilizers
pushed down expansion in large-scale manufacturing to 3.3%. Continued flexibility in
small-scale manufacturing and a pickup in construction to double digits supported
industry growth at 3.6% that was nevertheless nearly a full percentage point lower
than a year earlier.
Consumption grew by 5.1% in FY2015 and remained the largest demand-side
element in the gross domestic product (GDP). Private consumption expanded by
3.6%, benefitting from continued inflows of transmittals, higher public sector salaries,
and low inflation, while public consumption recovered to grow by 16%. Total
investment increased to equal 15.1% of GDP in FY2015, largely on higher public
fixed investment. Private fixed investment edged lower to 9.7% of GDP from 10.0% a
year earlier, hampered by continued energy restraints and the generally weak
business environment that has depressed investment for several years. Net exports
subtracted from growth for a second consecutive year as exports fell more sharply
than imports.

Economic prospects
GDP growth is expected to accelerate modestly to 4.5% in FY2016 and 4.8% in
FY2017, assuming continued macroeconomic stability, expected improvement in
energy supply, and planned infrastructure investment tied to an economic corridor
project linking Pakistan with the Peoples Republic of China (PRC). Further
enactment of structural reform will consolidate recent gains in macroeconomic
stability and improve the investment climate among the improving security situation,
especially in Karachi, the commercial hub of the country.