The slow down and the correction has finally hit the trade numbers.
The bad news is that compared to the previous month, December exports fell by about 14% in dollar terms. The good news is that imports fell by 22% and the balance of trade is now down to only 800 million US dollars. Foreign direct investment figures are running at 2 billion dollars for the six month ending December 2008, worker remittances came in at an annualized rate of 8.4 billion US dollars.
For a second, if you ignore the maturities of Pakistan’s dollar denominated debt, there is actually hope of a marginal current account surplus 12 months down the road.
Though it’s too early to comment on the rupee dollar outlook, if the current exchange flows and rates remain stable through June 2009, you may start seeing a slow appreciation in the rupee compared to the US dollar.
Other than this glimmer of hope the economy sucks. Cash is short and capital investment is at a standstill. In the next few months we will start seeing the impact of a dramatic demand side shock on the domestic front. Monetary contraction has already arrived and will be followed by a lowering of domestic inflation and interest rates.
If you haven’t sold your dollars, sell them by March.