Country Economic Forecasts > Pakistan

Pakistan continues to make progress under its IMF programme, with the ninth review under the EEF concluded in November and the next tranche (of US$500m) to be released soon. The IMF expects GDP growth of 4.5% in fiscal year 2015/16, up from 4.2% in 2014/15; we are a little more optimistic, forecasting growth of about 5%. Activity remains constrained by ongoing power shortages and mounting global and regional headwinds. But we expect growth to rise to 5.5-6% in 2017-18 as energy shortages are addressed and as investment picks up quite strongly, boosted by projects under the China-Pakistan Economic Corridor (CPEC), which will also lift export growth sharply. Power projects in the Punjab are getting under way, together with hydroelectric plans and road projects, and will be facilitated by closer banking collaboration.The twin deficits are also being reduced. The fiscal deficit fell to 5.3% of GDP in 2014/15 and the target for 2015/16 is set at 4.3%. And the current account deficit is likely to be very small in 2015 (it was just US$109m in Q3, down from US$1.5bn in Q3 2014) helped by a much lower oil import bill. But the external deficit will start to widen again in the next few years as import demand picks up and oil prices begin to rise.