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Pakistan Research

Global

Daily Update

February 26, 2015

Capital Market Daily
Pakistan Economy

Economic Indicators
FY13

CPI Inflation to touch 3.79% YoY in Feb15
In continuation with the declining inflationary trend, CPI inflation for the month of Feb15 is
likely to tick in at 3.79% YoY (-0.40% MoM) against 7.93% YoY in Feb14 (-0.32% MoM),
and a reading of 3.88% YoY registered during Jan15. The decline emanates from a setback
in the Transport group which is likely to shed ~2.51% MoM on back of ~10% decline in fuel
prices, coupled with a likely 0.87% MoM decline in Food & Non-Alcoholic Beverage group as
chicken and eggs prices decreased by ~20% MoM during Feb15. Our forecasted inflation for
Feb15 leads to an expected 8mo FY15 CPI inflation figure of 5.54% YoY against 8.65% YoY
registered during the same period last year. Given the figures at hand, there is a high
possibility of full year inflation falling within the SBP’s target range of 4.5% - 5.5% YoY.

FY14

Growth Rate (%)
Real GDP

Jul-Jun

3.7

Average CPI

Jul-Jun

7.4

4.1
8.6

M2 Growth

Jul-Jun

15.2

14.9

Exports

Jul-Jun

24.7

25.1

Imports

Jul-Jun

40.1

41.6

USD bn

Annual CPI YoY

Sep14

Oct14

Nov14

Dec14

Jan15

Feb15E

General

7.68%

5.82%

3.96%

4.30%

3.88%

3.79%

Remittances

Jul-Jun

13.9

15.8

Food & Non-Alcoholic Beverages

6.47%

4.41%

1.08%

2.53%

2.13%

2.37%

Current Account deficit

Jul-Jun

2.4

2.9

Housing, Water, Elec., Gas & Others

8.84%

5.62%

5.89%

5.84%

5.74%

5.77%

Clothing & Footwear

8.98%

8.53%

8.54%

8.81%

8.09%

7.83%

Transport

5.43%

3.95%

-3.27%

-6.02%

-8.10%

-10.47%

Furnishing & Household Equipment

8.49%

7.84%

7.26%

6.62%

6.42%

6.16%

Jul-Jun

8.2

5.8

as % of GDP
Fiscal deficit

Source: PBS, Global Research

Inflation Outlook

Source: SBP

Amidst slight recovery in international oil prices, the GoP is expected to adjust the prices of
petroleum products upwards w.e.f. Mar 01’15. Moreover, historical trend analysis underpins
significant increase in Food & Non-Alcoholic group prices in March as compared to February
every year as demand for food picks up after the end of winter season. Further stimulus to
an increase in Food & Non-Alcoholic group stems from the direct linkage between fuel and
food prices, with the former all set to rise early next month.
Monetary Policy Expectations
We believe contained CPI inflation, along with muted growth in M2, has set the tone for
SBP to go ahead with its monetary easing stance and slash a further 50 basis points in the
upcoming monetary policy. Post announcement, the discount rate is expected to stand at
8% - its lowest level in the last nine years. While a decrease in policy rate can be expected
to drive the currently depressed private sector credit off-take up north, recent data
released by the State Bank suggest otherwise. Jan15 advances went up by a meager
0.07% MoM while private sector credit off-take went down 1.81% MoM in response to the
previous discount rate cut announced by the central bank on Jan 24’15. The decline can be
attributed to banks focusing their advances towards investments in high yielding PIBs.

Board Meetings
Feb 26’15

Atlas Honda Limited

Feb 26’15

Habib Metropolitan Bank

Feb 26’15

Bank Alfalah Limited

Feb 27’15

Sardar Chemical Industries

Non-Tax Revenue Collection

Feb 28’15

Colony Textile Mills Limited

In the Federal Budget FY15, the GoP earmarked PKR 145bn to be raised through collection
of GIDC. Recall, in late 2014, Peshawar High Court had given a stay order against collection
of GIDC from industrial and CNG units, casting dark clouds over the government’s plans to
finance its spending. However, as per recent updates, the National Assembly’s Standing
Committee has approved the amended Gas Infrastructure Development Cess Bill 2014,
giving a legal cover to the tax collection for gas consumers. Given this development, the
government is unlikely to resort to additional borrowing that could have led to a growth in
M2 stock of the country.

Feb 28’15

MACPAC Films Limited

Mar 04’15

Unilever Pakisan Foods Ltd

SBP Discount Rate

17%

15%

15%

14%

13%

13%

Allied Bank

Apr 29’14

Engro Fertilizers

Source: KSE Notice

Haris Ali

11%

12%

haris.ali@gslpk.com

9%

Source: SBP

Source: SBP

Please see page 2 for important disclosures

Oct-14

Feb-15

Jun-14

Oct-13

Feb-14

Jun-13

Oct-12

Feb-13

Jun-12

Oct-11

Feb-12

Jun-11

Oct-10

Jun-10

Jun-15

Jun-14

Jun-13

Jun-12

Jun-11

3%
Jun-10

5%

8%
Jun-09

7%

9%
Jun-08

10%

+92.21.3245.7543

Feb-11

11%

Jun-07

Mar
26’14
AGMs
/ EOGM

M2 Growth

16%

Jun-06

AGMs / EOGM

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