The gloom before the boom

Even though some positive signs are starting to dot the economic horizon, the clouds of uncertainty, particularly on the political front have not completely dispersed over business prospects in the country.
After all, the past is not so easily forgotten. As the benchmark index of the countrys premier bourse has topped the 15,000 points mark, recollections of what followed the Bull Run from similar levels back in 2008, are enough to rattle nerves for the most weathered investors.
Inflation has dropped to single digits averaging in at 9.15 percent. Cost of capital is likely to shrink along with interest rates as inflation is expected to trend down in coming weeks.
Trade liberalisation in the region provides mass potential for economic gain. There are indications of foreign manufacturers establishing grounds in the region, like Stora Ensos JV with local company Packages Limited, finding it opportune to gain from improving Indo-Pak ties.
Opportunities in the EU with ATPs and GSP+, are churning a favourable outlook for local businesses, as local products will be given duty free access to the EU countries. ATPs are expected to come into affect by the end of October, whereas the probable approval of the GSP+ agreement will give duty free access to the countrys exports come January, 2014.
In correspondence with BR Research, Chief Executive Topline Investments Muhammad Sohail highlighted the possible future for the economy and mentioned that the country is currently in a stable state.
He emphasised that the upcoming elections will be crucial for the economy as given a change in the establishment with PML-N gaining prominence would bring positive outcomes for the country as they will concentrate on urban development. However, he believes that a reinstatement of the PPP-led coalition will continue to skew the rewards towards the rural economy.
Sohail appeared more upbeat regarding the performance of local stocks. He differentiated the latest positive sentiment at local bourses from the 2008 bull run by pointing out that while the latter was led mainly by leveraged individuals, this time around the positivity has come from sustained accumulation by financial institutions on cold, hard cash.
He referenced the election euphoria, relatively low interest rates and restructuring of Capital Gains Tax as major grounds for the positive streak at the KSE.
With so many positives, why is there still a sense for precaution and hesitance? Is it the negligence of the banks towards the private sector, the lack of sustainable infrastructure for future growth? Is it the worsening law and order situation, or the lack of trust in the establishment?
Any drive for expansion and growth foreseen by manufacturers is hindered by the denial of services from banks; whats more even if banks agree to finance certain projects the lack of infrastructure and energy are maddening hurdles to growth.
Still, as the elections draw nearer it is inevitable that the government will make all efforts to drive the economy and get money to the pockets of consumers. Who will be drenched when it rains rupees and who will be left high and dry will become apparent as the season swings in.