Pakistan macro statistics: pointing towards headwinds

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Federal Bureau of Statistics (FBS) released country’s trade prints for the first five months of FY12. As per the data released, Pakistan registered an export growth of 7.64per cent YoY to $9.38 billion in 5MFY12, while imports rose by a hefty 20.20 per cent YoY to $18.45 billion. Resultantly, the trade deficit for the period came in at $9.0 billion, up 36.73 per cent YoY. These numbers are likely to put more pressure on current account deficit which, in 4MFY12, was recorded at $1.55 billion. We expect the C/A deficit to further widen by $500-800 million in November, said Muzzammil Aslam at JS.
Furthermore, the country’s inability to attract financial account flows – ranging from foreign investments to debt related flows paints a dull picture for the overall macro situation. Given that IMF re-payments are to start in February 2012 – we expect it to put more pressure on the balance of payments, he said, adding that this may in turn create room for speculators to manipulate local currency, which has already lost four per cent YTD to dollar.
After a brief spell of a surplus of one year, Pakistan’s external account has reverted back to its usual deficit track. The deficit is mainly led by higher import bill, up by 20.2 per cent during 5MFY12. Already in 4MFY12, both petroleum products and crude oil registered a hefty growth of 46 per cent YoY and 76 per cent YoY, respectively. As a result, the share of oil imports rose to 41 per cent of the total import bill versus 33 per cent during last year. The rise in oil imports is mainly driven by higher international oil prices which registered an average growth of 38 per cent YoY.
Average oil prices in 4MFY12 were reported at $107/bbl versus $77/bbl during corresponding period last year. This can be further validated if one looks at oil marketing company industry sales data which shows a paltry three per cent growth in overall volumetric sales.
FBS reported a contraction of 10 per centYoY in exports toS$1.55 billion in November. Decline in exports is primarily driven by on going global debt crisis coupled with declining global commodity prices. However, we believe the export growth to revive in the months to follow, as last month witnessed fewer working days than usual due to the Eid holidays. Going forward, we expect Pakistan to report $1.6 billion worth fewer exports in FY12 than last year.
The deteriorating external account pressures have also started to appear at local currency bonds. Money supply (M2) for the first five months witnessed a meager growth of 1.32 per cent versus 4.53 per cent in the same period last year. Net Foreign Asset (NFA) registered a contraction of Rs110bn compared to last year’s surplus of Rs69 billion.