Here is an extract from Pakistan Risk Review’s second volume. This is where we were earlier this year.

Pakistan’s Macro Economic Snapshot – March& April 09

Inflation (Year on Year):

After peaking in August 2008, the consumer price index (CPI) and wholesale price index (WPI) have declined. The non-food, non- energy (NFNE) core inflation index, given its composition and structure and design, is a lagged series. It was slow to respond to rising inflation and will respond just as sluggishly to a decline in the inflationary series. CPI, WPI and core inflation are year-on-year figures, i.e. they represent the percentage change in index during a month over the corresponding month of the previous year.

 

 

 

 

 

 

 

Broad Money M2 growth

The downward inflationary trend is further supported by the shift in aggregate M2 growth numbers when compared to the previous three years and the current nominal growth rate of the Economy. From 30^th June 2008 levels, M2 growth on 9^th May 2009 stood at 4.59%. Cross checking with calendar yearend figures M2 growth for Jan-Nov 08 as well as for Nov 08-May 09 period stayed under 6.6% and 6.3%. This 17 month monetary contraction in real terms together with an unexpected boost in agricultural yields has created sufficient momentum for a downward adjustment in prices. On the flip side because of the contraction we will carry on seeing pressure on lending rates for private sector credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Investment and remittances:

Workers’ remittances series has been showing an increasing trend for the past two quarters. As of March 09, the annualized run rate of workers’ remittances is in excess of 8 billion US dollars. Similarly despite political, regional and economic issues the Foreign Direct Investment (FDI) series in Pakistan has shown surprising resilience on a year on year basis. Portfolio investment outflows have been less than predicted and as expected turned negative after the removal of floor from the Karachi Stock Exchange.

 

 

 

 

 

 

 

Balance of Trade:

Due to the economic slowdown, the imposition of duties on luxury items and the decline in crude oil prices the balance of trade numbers have improved significantly starting October 2008. For instance monthly cell phones imports by value are down to 10% of 2007-2008 levels while year to date import of cars (completely built up units) is down to 40% of 2007-2008 levels. Petroleum products import bill in March 2009 was down by 42% by value compared to March 2008 levels.

 

 

 

 

 

 

 

Foreign Exchange Reserves:

Total liquid foreign exchange reserves stood at US$11.15 billion end April 2009, up from the US$ 6 billion and change level touched in October 2008. The reserve situation is expected to improve further with expected support inflows from IMF, ADB and the World Bank as well as the grants committed at the Friends of Pakistan session in Tokyo earlier this year.

 

 

 

 

 

 

 

Advances, Deposits and Spreads: Banking System

Net Domestic Assets of the Banking system broke the 4 trillion rupee ceiling as of the most recent provisional SBP Broad Money update. The average spread between the lending rate on outstanding loans and the deposit rate on outstanding deposits stood at 7.62% in February 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Analysis – Imports

 

Except for metals all import categories registered negative growth when compared with March 2008 levels. However on a month on month basis imports within textiles, agriculture and metals showed significant growth compared to February 2009 numbers pointing towards a possible pickup in the economic cycle by Q4 2009.

By value Petroleum, Machinery, Food, Metals, Agricultural and Fertilizer products retained the top 6 spots in imports in March 2009. Over the last few months there has been a significant change in percentage share of import categories due to changing price, demand and consumption levels.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Analysis – Exports

 

Primary exposure in exports stays with the textile sector however food groups and other manufacturing have picked up share at the cost of textiles. Compared to 2008 level exports proceeds are 20% lower with the three top categories (Textiles, Food, Other Manufacturing) down by about 7.6% on average. However compared to February 2009 level, March numbers are showing a slight uptick in the same three categories.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GDP – Components

Based on GDP numbers released by SBP and FSB for 2008 data the share of Agricultural sector stood at 20.9%, Manufacturing at 25.9% and Services at 53.2%. Within these segments, Trade, Large Scale Manufacturing, Livestock, Transportation & Communications and Other services claimed the top 5 spots.

 

 

 

 

 

 

 

 

 

Cumulative Tax Revenue:

As of April 2009, Tax receipts stood at 898 billion and are expected to miss the 30th June year end 1.3 trillion rupee budget target. Depending on economic conditions in the next two months, the final Tax receipt number is expected to be in the 1.12 to 1.19 trillion rupee range with consensus forecasts hovering at the 1.15 trillion rupee number.