ISLAMABAD, Aug 11: The move to impeach President Pervez Musharraf will do no good to economy whether the move succeeds or fails, according to a leading international investor guide.

In both cases, Pakistan’s economic outlook contains more downsides than upsides.

In its latest “Asian Weather Report”, the US-based Merrill Lynch has reduced Pakistan’s forecast to “mild underweight” from an overweight position of 0.4 per cent about five weeks ago, saying the country, among its favourite markets last year, “is the epitome of what has gone wrong in Asia this year”.

Merrill Lynch’s weather forecast describes countries with positive outlook as overweight and those with negative expectations as underweight on the basis of foreign exchange gains, real GDP growth, forward earnings and a set of other valuations.

The report, which evaluated almost all Asian economies, says that in Pakistan the impeachment of President Musharraf is the primary overhang. “If successful, it will hardly restore investor confidence as the president is closely associated with Pakistan’s economic revival of 2000-2007.

If the impeachment is unsuccessful, the conflict between the new government and the president will remain an ongoing issue and distraction.”

Merrill Lynch provides investor advisory services to companies and individuals across the globe. It said Pakistan’s problem is politics. “It can be argued political noise is nothing new to the country; last year there were over 60 suicide bombings and yet the stock market rose 40 per cent.”

It said the new government was as pro-business in principle as the old one was, but the new one has not been cohesive, and was more focused on impeaching the president than preventing economy from going into a tailspin.

It added that the government’s inability to forge a compromise among coalition parties meant the crucial role of finance minister has been relegated to the minister of privatisation, and remained unfilled.

Moreover, with its fuel subsidies lifted, inflation in Pakistan should range in the low 20s until March, and interest rates would need to remain high. “That being said, valuations in what was already Asia’s cheapest market are now extremely low. On balance, we see little upside, but the potential for downside if politics deteriorate further,” the report said.

Talking about other countries in the region, the report forecast positive outlook for Singapore and South Korea, stable position for Thailand and China, mild negative expectation about Malaysia, Philippines, Taiwan, Hong Kong, India and Indonesia and a very negative outlook for Australia.