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Print Print 2020-04-03

Moody's scales down growth to 2-2.5 percent

Moody's Investors Service has revised downward the Gross Domestic Product (GDP) forecast for Pakistan from 2.9 percent to 2-2.5 percent, ie, by up to 0.9 percent for 2020.
Published 03 Apr, 2020 12:00am

Moody's Investors Service has revised downward the Gross Domestic Product (GDP) forecast for Pakistan from 2.9 percent to 2-2.5 percent, ie, by up to 0.9 percent for 2020.
"We expect Pakistan's real GDP growth to slow to 2 percent - 2.5 percent for fiscal 2020 (which ends 30 June 2020), lower than our earlier forecast of 2.9 percent, reflecting the impact of the coronavirus pandemic," said Moody's in its latest report on Pakistan.
Consumption of services, which has underpinned growth in recent years, will be adversely affected by the movement restrictions. The textile sector, the country's key manufacturing sector which accounts for around 60 percent of exports, has also been hit by supply-chain disruptions and a decline or postponement of orders. Manufacturing loans (mainly to the textile and food sectors) accounted for 62 percent of private-sector loans as of 29 February 2020, maintained the report.
"The policy rate reduction to 11 percent follows a 75-basis-point cut on 17 March and will help maintain credit growth, which we expect will remain below nominal GDP growth," it added.
Moody's further stated that Pakistani central bank's measures will soften coronavirus effects on banks.
On 26 March, the State Bank of Pakistan (SBP), the country's central bank, cut its policy rate 150 basis points to 11 percent, reduced banks' capital conservation buffers (CCB) 100 basis points to 1.5 percent, relaxed terms for new and existing loans and announced other forbearance measures to increase banks' cushion against the economic effects of coronavirus.
"We expect the measures to mitigate banks' asset-quality deterioration amid less business generation and loan growth in an economic slowdown," the report argued.
Additionally, the Pakistani banks were rated as follows- Habib Bank Limited (B3 stable, caa11), National Bank of Pakistan (B3 stable, caa1), United Bank Ltd. (B3 stable, b3), MCB Bank Limited (B3 stable, b3) and Allied Bank Limited (B3 stable, b3) - benefit from high or very high levels of government support, which will shield their credit profiles from impairment of their standalone credit assessments.

Copyright Business Recorder, 2020

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