2013-10-13 14:14:35 - Recently published research from Business Monitor International, "Pakistan Shipping Report Q4 2013", is now available at Fast Market Research
Recovery On The Cards For Fiscal 2013/14
Two major things have impacted our forecasts for the Pakistani economy since our last quarterly report. First, after widespread revisions to the country's GDP series, it appears that growth was much weaker than expected in the 2012/13 fiscal year (which ran from July 2012 to June 2013). Economic growth in the revised national accounts data in fact declined to a three-year low of 3.6%. That said, the second point is that a number of factors confirm good recovery prospects for 2013/14. On the political front the clear victory for the Pakistan Muslim League-Nawaz (PML-N) in the May general elections has helped build a degree of confidence. This was the first orderly transition from one
elected government to another in Pakistan's modern history. Recent data releases have shown manufacturing output, private sector credit, and foreign direct investment all beginning to pick up in the last few months. We also believe the new administration will act to improve the fiscal balance, monetary policy will remain supportive, and that Pakistan's two main export markets, the EU and the US, will grow a little faster. The biggest downside risks include the country's long-running energy crisis and the poor security environment, two challenges that are impossible to resolve overnight and that are likely to continue to hold back the economy's full potential. Taking all this into account, we now expect GDP growth of 4.0% in 2013/14, and 4.0% again in the following year, 2014/15.
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Looking at the port sector, we expect volume growth to be quite strongly positive in 2013/14, coming in ahead of GDP, and largely because we are now predicting a significant recovery in foreign trade, which will rebound by 11.3% in real terms.
Headline Industry Data
* 2013/14-tonnage throughput at the Port of Karachi is forecast by BMI to grow by 4.4% to 41.813mn 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 5.2% to 26.601mn tonnes.
* 2013/14 container throughput at the Port of Muhammad Bin Qasim forecast to grow by 5.4% to 803,746TEUs.
* Pakistan's total trade forecast to see real growth rebounding strongly to reach 11.3% in 2013/14.
Key Industry Trends
Problem for Karachi PDWCP Project - Bad Roads: According to local press comment, the ambitious Pakistan Deep Water Container Port (PDWCP) project faces a serious problem: poor roads. Phase 1 of PDWCP, currently under construction at Keamari in Karachi Port, will open for business in 2015 at an estimated cost of US$1bn. The work commissioned by the Karachi Port Trust would increase capacity in a number of phases to 12mn TEUs. Phase 1 will take capacity up to 3.2mn TEUs. One analyst has warned that three existing routes for container truck movements are all in a poor state, including one where 'the route is so narrow that two trucks travelling in the opposite directions cannot pass each other without a slow display of tight manoeuvring skills by the drivers'.
Talks Continue With Chinese Over Gwadar Port: Kamran Micheal, the Pakistani minister for ports and shipping, said in July that talks were continuing with the Chinese authorities to finalise the concession agreement for Gwadar Port. Pakistan had earlier announced that the port was being granted to China Overseas Port Holding Co., which is taking over operation of the facilities from Port of Singapore Authority. One possibility he was looking into was the development of an 'oil city' at Gwadar where refineries could be located to meet China's energy needs, potentially processing crude oil delivered by pipeline from Iran. The minister said the central government had approved a PKR31bn (US$303.9mn) budget to build a Gwadar-Kashgar highway, necessary to give the port hinterland connectivity.
Three LNG Terminals For Port Qasim: The Pakistani cabinet's Economic Coordination Committee in July granted approval for the construction of three liquefied natural gas (LNG) terminals at Port Qasim. The three terminals will be used for importing, storing and re-gasifying about 1.7bn cubic feet per day at the port. The Fast Track Engro Terminal project, which will entail an investment of US$30-40mn and will have a LNG handling capacity of 200mn cubic feet per day, is scheduled to be completed in six to eight months. Meanwhile, the SSGC LPG retrofit project worth US$175-200mn and a new LNG terminal project valued at US$200-250mn are expected to be completed within 18-22 months and 26-30 months respectively.
Key Risks To Outlook
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