2013-12-23 17:05:36 - New Transportation market report from Business Monitor International: "Pakistan Shipping Report Q1 2014"
Short Term Growth Forecast Reduced
We were expecting the State Bank of Pakistan (SBP) to turn hawkish at some point this year, but it did so suddenly and caught us (and many other analysts) a little bit by surprise in September when it increased its benchmark interest rate by 50 basis points (bps) to 9.5%. Given ongoing concerns over inflation, we expect another 50bps worth of tightening is in the offing. The government's recently-approved Extended Fund Facility (EFF) agreement with the IMF also points to tightening conditions. The EFF requires Pakistan to rebuild its foreign currency reserves. As the country goes about buying dollars, the short-term effect is to weaken the value of the rupee (down 7.5% against the US dollar
in the four months to mid-October) and reduce domestic demand. Consistent with the EFF, the recently elected Pakistan Muslim League-Nawaz (PML-N) government is tackling its large inherited fiscal deficit. The deficit was 8.0% of GDP last year and the government is seeking a reduction to 6.8% of GDP this year. As a first step the goods and service tax (GST) has already been increased, and energy subsidies have been reduced.
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Taken together, in BMI's view what has emerged in recent months is a monetary and fiscal squeeze which is painful but needed to tackle some of the imbalances in the Pakistani economy. We believe it will reduce domestic consumption and gross fixed investment on the short term, something that will be only partially offset by a recovery in net exports as the eurozone and the US economies strengthen into 2014. As a result we are cutting our GDP growth outlook for the 2013/14 fiscal year (ending June 2014) to 3.4% (down from 4.0% previously). However we are holding our prediction of 4.0% growth in 2014/15.
Given the reduction in our GDP growth forecast for 2013/14, we have trimmed back the levels of activity we expect in Pakistan's main ports. That said, however, it needs to be noted that cargo handling will still be a little busier than in the preceding year. While GDP growth will be 0.4 percentage points lower in 2013/14 compared to the preceding year, in our predictions foreign trade growth will be up sharply to 11.0%, compared to 4.9% in the preceding year. This helps explain why the port of Karachi will be busier in 2013/14 than it was in 2012/13. Port Qasim will see slightly lower bulk tonnage, but stronger box traffic.
Headline Industry Data
* 2013/14-tonnage throughput at the Port of Karachi is forecast by BMI to grow by 2.4% to 39.444mn tonnes.
* 2013/14 container throughput growth at the Port of Karachi forecast to increase by 2.4% to 1.566mn twenty-foot equivalent units (TEUs).
* 2013/14 tonnage throughput at the Port of Muhammad Bin Qasim forecast to grow by 2.4% to 25.456mn tonnes.
* 2013/14 container throughput at the Port of Muhammad Bin Qasim forecast to grow by 21.3% to 731,386TEUs.
* Pakistan's total trade forecast to see real growth rebounding strongly to reach 11.0% in 2013/14, up from 4.9% in the preceding year.
Key Industry Trends
PNSC Set To Buy Two Tankers: Pakistan National Shipping Corporation (PNSC) plans to purchase two double-hull tankers in a deal worth US$45mn as it upgrades its nine-vessel shipping fleet. PNSC, which the government has shortlisted for privatisation, received an approval from its shareholders at the annual general meeting for the acquisition of one Aframax oil tanker and one LR-1 product tanker, which would increase the fleet to 11.
The Long Wait For A National Maritime Policy: Bureaucratic delays, including a slow response from Pakistan's provinces, meant that after three-and-a-half years the draft National Maritime Policy (NMP) had still not been finalised, said retired Vice Admiral Asaf Humayun. Humayun, who is also director-general of the National Centre for Maritime Policy (NCMP) said part of the problem was Article 18 of the constitution that devolved maritime functions to provinces that lacked the vision and capacity to take them on effectively. Meanwhile, delays in finalising the draft had been affecting trade, economic activity, and environmental, security, and strategic issues for Pakistan. Instead of organising port operations under a unified command or at least through a coordinated effort, the maritime sector of the country was being dealt with separately by different ministries and provincial governments, Humayun said. There should be an integrated approach to get rapid and long-term advantages from the nation's maritime waters, he urged.
Gwadar Port To Be Completed In Early 2014: Pakistan's Gwadar port is to become fully functional by the end of Q114, according media reports. As of October 2013 around 60% of the site's development work has been completed, as was confirmed by shipping minister Kamran Michael at the 2013 International Conference and Exhibition on Shipping, Logistics and Supply Chain Management. Michael has stated that the completion of the port will provide a significant boost to the country's immediate economic growth prospects. 'This port will connect the Gulf region and the Middle East to South East Asia and is equally vital for national growth and in securing the economy of Pakistan,' said the minister.
Key Risks To Outlook
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