KARACHI, Oct 11: Pakistan’s efforts to recover from the worst natural disaster in its 59-year history are expected to eventually boost slowing economy and support its currency and stocks.
But analysts said given the northern areas’ small contribution to the country’s $100 billion economy, any losses would be more than compensated by the reconstruction efforts and aid inflow.
“With the epicentre of the losses in the northern areas, the impact on the wider economy will not be large. In fact, as reconstruction picks up it will be positive for the economy,” said Sakib Sherani, ABN AMRO’s head of research in Islamabad.
Pakistan’s economic infrastructure of ports, airports, dams, factories, telecommunications, financial system, power plants and refineries has largely been spared, and the northern areas constitute a minute portion of the country’s agricultural land and industrial estates, Mr Sherani added.
He said it was too early to assess the full impact, and would stick to his GDP growth forecast of 6-6.5 per cent, down from last year’s 8.4 per cent.
Financial markets were quick to recover from an initial knee jerk response to the disaster. The Karachi Stock Exchange index on Tuesday rose 1.2 per cent to a seven-month high, recovering from a one-week low hit on Monday.
The rupee was little changed after Monday’s 0.07 per cent fall to Rs59.73/75 per dollar. The overnight inter-bank market rate has also been steady at 8.9 per cent.
Arshad Arif, head of research at brokers KASB Securities, said Monday’s initial sell-off in the stock market was down to worries about losses to telecommunication infrastructure owned by PTCL and concerns for oil companies, like Pakistan State Oil, which own some pump stations in the region.
Beyond those concerns, Mr Arif said the need to rebuild infrastructure and rehabilitate survivors would have an immediate impact on demand for construction materials and consumer goods.
“In the long run we expect the industrial sector to receive a real boost once the reconstruction activities start,” he said.
He said major cement producers like Lucky Cement and DG Khan Cement would like to win a bigger slice of the new demand. Among consumer firms, Nestle Milk Pakistan and Unilever Pakistan stand to be the biggest beneficiaries.—Reuters
