KARACHI: Pakistan macros continued to show improvement in FY15 as economic indicators including economic growth, inflation, fiscal deficit and external account showed improvement over the previous year.

Pakistan GDP grew by 4.2percent in FY15, after 7 years, compared to 4.0percent in FY14. Although, GDP grew slower than the targeted rate of 5.1percent set by Govt., it was still considerably higher than the last 5-year (FY10-14) average growth rate of 3.5percent.

Agriculture and services sectors grew by 2.9percent and 5.0percent, respectively, whereas, industrial sector grew by 3.6percent. Agriculture and services sectors witnessed improvement over the previous period. However, industrial sector growth slowed down during the year and remained lower than the Govt. target of 6.8percent driven by lower growth in Large Scale Manufacturing Sector (LSM).

 Higher infrastructure spending, improving energy and law & order situation, lower oil prices and increase in aggregate demand will help lift GDP above 5percent in FY16-17, we believe.

Government continued its fiscal consolidation program in FY15 as budget deficit was contained at 3.8percent in 9MFY15 as against 3.9percent in the previous year. For full year, it is anticipated to clock-in at 5percent, largely in line with Govt. target of 4.9percent.

Investment to GDP ratio improved to 15.1percent of GDP as compared to 14.9percent in the previous year. Public sector investment grew by 26percent to Rs1.06 trillion, whereas, private sector investment increased to Rs2.6 trillion, up by 5percent.

Lower oil prices, contained food inflation and lower M2 growth led to sharp fall in inflation to 4.7percent in 11MFY15 as against 8.7percent in the same period last year. For full year FY15, CPI is anticipated to clock-in at 4.5percent, significantly lower than Govt. target of 8percent.

Sharp fall in oil prices, higher inflow of remittances, SUKUK bond issue and release of IMF tranches helped Pakistan improve its foreign reserves level to a 4-year high of $17.7 billion as of April 2015, which is equal to 6-month import cover.