DIVERSE views, wide part, on how the economy will fare are being expressed by various stakeholders, but a majority expects the private sector-driven growth of 5pc this fiscal year. However, there is a consensus that economic outlook for calender year 2015 hinges on the improvement of the energy supply and the security situation.

The falling petroleum product prices and possibly cheaper bank credit are expected to cut production costs and yield better margins, which may energise the private sector. The low inflation is expected to increase the real income of the common citizen stuck with static wages. This will supplement the already strong consumer demand in the country, incentivising consumer goods producers to expand their operations and production.

However, no significant improvement is expected in 2015 in the quality of growth, as the government has intends to divert Rs00bn from the development spending to finance new security initiatives. The government is using provincial budget surpluses to moderate the high fiscal deficit. And the private sector is too narrowly focused on making their businesses successful, to care for the overall macro impact.

The cut in development spending in emerging economies like Pakistan tends to deepen social, regional and household disparities. The PML-N’s fixation with projects like glittery metro buses motorways will eat up whatever little is available to improve social spending for the benefit of the 40pc of the population that can’t afford to avail them.

The fundamentals are strong and the country, with all its weaknesses, proved to be a good destination for operational multinational companies — OICCI President Asad Jafar

No expansion is expected in 2015 in health and education cover or the access of water and power for the country’s vulnerable.

But the asset fund manager and broker community beats the officialdom in the latter’s enthusiasm for the emerging economic outlook. They were the most optimistic of a dozen stakeholders contacted for feedback. Economists and civil society activists were generally pessimistic, spelling doom and gloom if Peshawar tragedy is repeated.

The representatives of local and international businesses were were cautiously optimistic. They projected acceleration in GDP growth by about 1pc, from the current 4.1pc to 5.1pc in FY2015. Their opinion was seconded by recent comments by key institutional donors such as the Asian Development Bank.

Asad Jafar, president of the Overseas Investors Chamber of Commerce and Industry (OICCI), believes that the business environment might take longer to become more attractive for new foreign investors. But he expects consumer product companies like Nestle, Unilever, P&G etc to lead manufacturing in 2015.

He ranked energy-related companies, textiles, infrastructure and oil companies, in that order, to do better in the year ahead.

“The fundamentals are strong and the country, with all its weaknesses, proved to be a good destination for operational multinational companies. The fact is that most corporate visitors are pleasantly surprised once they arrive in Pakistan and find it way better than its image,” he commented.

However, his ranking of the most promising sectors clashed with a more conservative official of the federal ministry of industries. A senior insider admitted that a systematic study has not been undertaken to evaluate the potential of different industrial sectors and their expected performance. He placed textiles at the top, followed by pharmaceuticals, fertiliser, sugar and cement sectors, without giving out much to substantiate the order of the ranking.

Former finance minister Dr Hafiz Pasha sounded worried. “A repeat of the Peshawar tragedy can lead to a major withdrawal of foreign investors from the capital market, and the country can again land in a 2008-like situation when footloose foreign investors pulled out, letting the market crash,” he told Dawn over phone.

He hoped that the government would succeed in reining in the spectre. On the potential of sectors in calender year 2015, he forecast 4-5pc growth in agriculture on the back of a bumper wheat crop and modest growth in cotton output. He did not foresee a reversal in the trend of stagnation in manufacturing anytime soon. Mining and quarrying would grow, but chopping of the PSDP will hold back construction from booming, he said. In the services sector, Dr Pasha foresees growth in defence.

He expected the fiscal deficit to escalate as the government will be again required to retire circular debt at some point in 2015. The balance of payments will get a cushion because of reduction in the oil bill, he said.

Most analysts painted a rosy picture and mentioned Pakistan as the third best performing capital market several times. Muhammad Sohail, CEO of Topline Securities, sees great promise in 2015 as the government moves ahead with the reform agenda, and as energy projects come on line, credit cost is lowered and the oil price windfall is managed prudently.

He placed the financial sector at the top in terms of growth potential, followed by power-related companies, IT and telecommunication companies, fast moving consumer goods companies and auto manufacturers.

He believed that an easing of the energy crisis will revive several small- and medium-sized companies operating below capacity because of the energy crunch.

“These folks sell optimism to their clients and get into the habit of exaggerating the positives,” an economist-turned-civil-rights activist commented.

“Much will depend on the economic governance of the government. Instead of relying on creative accounting, external inflows and populist projects, the government must devolve authority and responsibility, and desist the temptation to cut development spending to put the economy on fast-paced development,” concluded another economist.

Published in Dawn, Economic & Business, January 6th, 2015

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