KARACHI: Eric Robertsen, Global Head of Research and Chief Strategist at Standard Chartered has said that Pakistan’s economy has shown encouraging signs of recovery, including stronger foreign exchange reserves, moderating inflation, and a rebound in growth.
Speaking at a media roundtable in Karachi, Robertsen said Pakistan’s economy has made notable progress in stabilizing its financial position, but sustaining that momentum will depend on how much of the current improvement stems from domestic reforms rather than favorable global conditions.
“We’ve seen a rebuild of FX reserves and an improvement in the growth-inflation trade-off,” he said.
“GDP growth in the range of 3.5 to 4 percent and single-digit inflation are positive developments, and Pakistan has been rewarded for that with ratings upgrades.”
However, Robertsen cautioned that part of this progress may be driven by external factors such as global excess liquidity and investor appetite for higher-yield markets. “The real question is how much of the improvement is because of Pakistan and how much is because of external factors,” he said.
“If the global environment becomes less friendly next year, say liquidity tightens, then we’ll see whether some of the underlying vulnerabilities re-emerge,” he cautioned.
He added that if the State Bank of Pakistan (SBP) continues to manage inflation effectively and gradually lower interest rates, it could attract more capital inflows.
“Pakistan can achieve growth of 3.5-4 percent, if inflation stays under control, if the central bank could continue to cut interest rates,” he said. But, he thinks the central bank is probably nearing the end of its rate-cutting cycle.
He emphasized, however, that global investors weigh potential returns against perceived risks.
“Investors aren’t scared of risk if they’re getting paid to take that risk,” he said.
“The challenge for emerging markets over the past several years has been that the premium over US Treasuries hasn’t been high enough to justify taking on additional risk.”
Robertsen also addressed liquidity trends and investment behavior in Pakistan’s local markets, noting that excess savings play an important role.
“Liquidity isn’t just about interest rate cuts or reserve ratios,” he said. “Excess savings themselves are a form of liquidity that influence how markets behave.”
He mentioned that the world’s next major economic story may not be inflation or recession, it could be deflation. According to Robertsen, China’s slowdown is exporting deflation across Asia, bringing both relief and risk for countries like Pakistan that depend on imported goods but struggle with competitiveness.
He said that the global economy is undergoing “an incredibly important transition” with “an abundance of liquidity in the global economy.”
“There’s a lot of money in the system, but it’s not being used,” he said and added in China, the liquidity is there, but the demand for credit in the economy is not there. In economic terms, we say the velocity of money is zero.
“Single most important economic theme for the entire region of Asia, maybe even for all of emerging markets. China is exporting deflation to the rest of the world,” he said.
Despite this deflationary wave, he said there is still enormous liquidity waiting to ignite.
“We have seen over 300 rate cuts from central banks in the last two years,” he said. The last time we saw that kind of a number was in reaction to the global financial crisis. And yet we haven’t had a global financial crisis in the last two years. Central banks have pumped an extraordinary amount of liquidity into the system, he added.
Terming the current atmosphere and “incredibly important transition” for the global economy, Robertsen said that while it’s “not a crisis moment, but it’s a turning point. When liquidity tightens, we’ll see which economies were floating and which were swimming.”
Copyright Business Recorder, 2025
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