Moody’s Investors Service predicts a further 2% reduction in Pakistan’s growth this fiscal year due to the Coronavirus.
How much will Pakistan’s growth rate fall in this financial year?
Moody’s Announces Annoying Report According to a newspaper report, Moody’s predicts that Pakistan’s current fiscal year growth rate will be reduced to 2.5% due to the Coronavirus. The growth was predicted at 2.9%. According to Dawn, the State Bank of Pakistan has estimated a GDP growth rate of 3%, while the National Bank had earlier projected a growth rate of 3.5%. Moody’s said in his latest ‘Regional Credit Outlook Update’ on the impact of the Coronavirus, “The risks for the PAC are decreasing, including the weak European and US economies.”
What percentage of Pakistan’s growth will be reduced in the troubled fiscal year of Moody’s?
The report said that the growth rate for China was 4.8 percent, which was previously reported at 5 percent, and that this was due to a slowdown in economic activity and a decrease in export demand. That said, the APAC was revised for the region, predicted by the impact of the Coronavirus due to recent oil price cuts, including travel restrictions and isolation measures. “Our basic scenario shows a reduction in consumption levels in the first half of 2020 and continued disruptions in production and supply,” said Moody’s Vice President Christian de Guzman. Then there will be restored in the second half of the year. ‘In the short term, it is displaying negative supply and demand, and if obstacles are prolonged, there is a risk of a global crisis.
The Dawn newspaper reports that the recent move by the State Bank of Pakistan (SBP) would reduce the impact of the outbreak on domestic banks.
Moody’s termed Pakistan’s economic scenario as negative:
On March 17, Moody’s predicted Pakistan’s GDP growth to decline from 2.9 percent to 2.5 percent in December, citing mostly external growth factors in the region. However, this New York-based agency has indicated even less growth for Pakistan.
In its statement, the agency said, “We have the fiscal year 2020 ending June 30.” For this, Pakistan’s actual GDP growth is expected to be 2 to 2.5 percent, which is lower than our earlier forecast of 2.9 percent.
“The ban on mobility will have a very negative impact on the services,” the Moody’s Investors Service statement said. “The textile sector is the main manufacturing sector in the country, and its exports are about 60 percent,” he said. However, it is being affected by supply chain disruptions or orders being postponed.
Pakistan likely to Miss Inflation:
Moody’s has negatively downgraded the status of Pakistani banks. By the end of February 2020, private sector loans accounted for 62 percent of the manufacturing loan (especially in the textile and food sector), the statement added. Moody’s hoped that recent policy initiatives from the central bank would help 5 major Pakistani banks.
In addition, on March 26, the State Bank reduced interest rates by 150 basis points to 11 percent, and the Bank’s Capital Conservation Buffers (CCB) was reduced by 100 basis points to 1.5 percent.
The terms for new and existing loans were relaxed.
“We expect that measures will be taken to negatively impact banks’ assets while increasing business output and credit growth,” said Moody’s. The proposed mini-budget measures are insufficient to address the fiscal deficit
Also, according to the agency, the top 5 banks in the country will benefit from more or more government support from Habib Bank Limited, National Bank of Pakistan, United Bank Limited, MCB Bank Limited, and Allied Bank Limited, which will allow their credit profiles to stand out. Elon will help with the credit.